Following the uncertainty created by the Full Federal Court, which delivered two conflicting judgments on the scope of proportionate liability regimes under Commonwealth legislation (see our previous article, Proportionate liability in Commonwealth legislation: Full Federal Court disagrees with itself), the High Court has settled the matter.
The decision in Selig v Wealthsure Pty Ltd puts to rest the question of whether claims under Commonwealth legislation that are not apportionable become so because they result in the same loss or damage as an apportionable claim.
The Full Federal Court decisions
The matter involved a claim for breach of contract, common law misleading or deceptive conduct and breach of the misleading or deceptive conduct provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The misleading or deceptive conduct provisions of the Corporations Act and the ASIC Act contain a proportionate liability regime.
The majority of the Full Federal Court decided that all claims were covered by the proportionate liability regime because they resulted from the same loss or damage that was apportionable under the legislation. In effect, this involved a test focusing on the loss or damage claimed, as opposed to the characteristic of the cause of action.
Applying this decision, even if some claims are not apportionable if they are brought on their own, they may become subject to proportionate liability when the loss or damage caused by those claims is the same as the loss or damage caused by contravention of the legislation, imposing a proportionate liability regime.
However, a week later the Full Federal Court in ABN AMRO Bank NV v Bathurst Regional Council expressly rejected the reasoning of the majority in Selig.
This matter involved a claim about false or misleading statements (non-apportionable) and misleading or deceptive conduct (apportionable) under separate sections of the Corporations Act, with both claims arising out of the same facts.
This time the Full Federal Court (differently composed) unanimously ruled that claims that do not fall under specific proportionate liability legislation are not subject to proportionate liability. Accordingly, as the applicant succeeded on both claims, the applicant could elect the remedy that it wanted. Based on the nature of the appeal, the applicant was taken to have elected the remedy that fell under the non-apportionable claim, and the respondents were liable for the full loss on a joint and several basis.
The High Court settles the matter
The High Court unanimously rejected the Full Federal Court's reasoning in Selig and held that claims that do not fall under specific proportionate liability legislation are not subject to proportionate liability, even if they result in the same loss or damage as an apportionable claim.
The High Court's reasoning was based on the statutory interpretation of the specific proportionate liability provisions' wording. The court noted the wording made it clear that the proportionate liability regime did not apply to any other claims beyond those specifically referred to in the provisions.
What does this mean?
The key implication of the High Court's decision is that non-apportionable claims under Commonwealth legislation do not become apportionable, even if the claim results in the same loss or damage as an apportionable claim.
Therefore, if you are a defendant in this situation, you are liable on a joint and several basis for the full loss and, if you are unable to recover the loss from any other potential co-defendants (e.g. if they are insolvent), you may be responsible for paying the full loss.
On the other hand, if you are the plaintiff and you are in the position that some of your causes of action are apportionable while others are not, you will need to consider how to plead your case. In most instances, this will involve pleading on the basis of seeking a remedy under the non-apportionable cause of action so that the risk of non-recovery from a party is minimised.
Accordingly, if you are involved in a claim based under Commonwealth legislation that could involve a statutory proportionate liability regime, it is crucial to carefully examine the wording of the regime to determine which causes of action are apportionable and which are not.