A unanimous Court of Appeal made the obiter dicta observation that the only cause of action that is apportionable under the Australian Consumer Law is the civil liability arising from misleading or deceptive conduct prohibited by s18 (a general prohibition on misleading or deceptive conduct in trade or commerce).  Causes of action based on other similar but narrower provisions in the Australia Consumer Law, such as the s30 prohibition on false or misleading representations in connection with the sale or grant of land, are not apportionable.  

Whilst the Court of Appeal’s observation was obiter, this case is the latest in a line of Federal and High Court decisions, and is arguably consistent with analogous views of the High Court in Selig v Wealthsure Pty Ltd [2015] HCA 18 (Selig).  

The authors considered those cases in an article last month, and this new case should be seriously considered by those whose interests are affected by proportionate liability.  

Williams v Pisano [2015] NSWCA 177 - The facts  

This matter involved the redevelopment, marketing and sale of a residential property by two vendors, Ms Dandris and Mr Williams.  Ms Dandris, had obtained an owner-builder permit and through 2010 and 2011, engaged and supervised various contractors to redevelop the property.  Although in the early stages an architect and engineer had been engaged, by the time that a builder carried out works in 2010 and 2011, the builder did so without the benefit of detailed architectural plans or architectural supervision.  

From about November 2011, the vendors engaged real estate agents to market the redeveloped property.  The property was marketed, through various mediums, on the basis that it had been redeveloped to a high standard.   

Mr and Ms Pisano, the purchasers, agreed to purchase the property for $3,350,000 with the sale contract completing in January 2012.  Soon after, problems began to emerge and there was significant water ingress during rainy weather in April 2012.  At trial, it was said that the costs of rectification would amount to $1,171,124.  

At first instance, the Supreme Court concluded that the purchasers had been induced to enter into the sale contract by reason of representations made by the vendors through their agents.  The representations consisted of statements in web advertisements, in a physical brochure concerning the property and the standard of the renovations that had been carried out, and also oral statements made by the vendors’ agent about the nature of the renovations and the competence of the builder (Representations).  

Mr Williams, appealed the Supreme Court decision.  On Appeal, Mr Williams accepted that the Representations were misleading and made with the authority of the vendors.  

Mr Williams, however, argued that the Representations did not constitute conduct ‘in trade of commerce’ as required by s18 and s30 of the Act.  Mr Williams also argued that, in the event he was liable, the matter was an ‘apportionable claim’, that the other vendor (Ms Dandris) was a ‘concurrent wrongdoer’ and he was only liable for a proportionate share of the purchasers loss, and not 100% of that loss.  

Proportionate Liability and the Australian Consumer Law  

Although the Appeal was ultimately decided on a point which is discussed later in this article, Emmett JA commented that it would be ‘desirable’ to provide provisional observations on the application of proportionate liability in this matter. One of those observations, that proportionate liability would only apply to s18 claims, was followed by Bathurst CJ and McColl JA.  

Emmett JA considered Pt VIA of the Australian Consumer Law which contains the proportionate liability provisions.  Section 87CB(1) provides the definition of what is considered an ‘apportionable claim’.  It concludes with the sentence that an apportionable claim is one “… caused by conduct that was done in a contravention of section 18of the Australian Consumer Law”. [Emphasis added].   

The question is whether that should be read strictly as applying only to a s18 cause of action, or whether the words ‘caused by conduct’ mean that some conduct which gives rise to multiple causes of action (say s18 and s30) will be apportionable so long the underlying conduct is in contravention of s18.   

Emmett JA referred to the recent High Court decision ofSelig.  In Selig, the High Court considered the same question, but in the context of the analogue provisions of the Corporations Act.  Section 1041L of the Corporations Act corresponds to s87CB of the Australian Consumer Law.  Section 1041H of the Corporations Act corresponds to s18 of the Australian Consumer Law.  

In Selig, a unanimous bench concluded that as a matter of statutory construction, only contraventions of s1041H were apportionable.  

Emmett JA followed the High Court’s construction and further said at [61]:  

“…had Parliament intended s 87CB to apply to claims for damages caused by conduct contravening provisions other than s 18, it could very easily have done so, by omitting the words “of section 18” from sub-s (1).  It has chosen not to do so”.  

Emmett JA was also of the view that policy reasons favoured that construction.  His Honour said that other causes of action carry pecuniary penalties (such as s30), which  suggests that Parliament had determined that contravention of those provisions involves a higher level of moral culpability.  

Similar considerations were made in the judgment of the Full Court of the Federal Court in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65 which considered the analogue provisions of the Corporations Actand came to the same conclusion.  

However, the High Court in Selig held that it was not necessary to resort to a consideration of policy purpose to explain the confinement of apportionment to contraventions of s1041H because ‘the terms of the relevant provisions of Div 2A are clear’.  

Although Emmett JA’s consideration of the policy purpose goes into territory which the High Court said was not necessary to traverse, it does not derogate from the conclusion on construction (which was in line with the High Court’s view in Selig).  

‘in trade of commerce’  

Whilst the obiter statements made about proportionate liability will be concerning to real estate agents, the ratio decision on which this case turned is good news for both real estate agents and the vendors of residential property.  

Emmett JA (followed by Bathurst CJ and McColl JA) examined s18 and s30 of the Act, and the qualifier to each of those provisions that the conduct complained of must be conduct ‘in trade or commerce’ before those sections will find operation.  Emmett JA began with the observation at [38] that:  

“In ordinary circumstances, a person who sells his home, whether by private treaty or by auction and whether he conducts the negotiations personally or through a real estate agent, would not be said to be undertaking those activities in the course of a trade or business or in a business context”.  

Emmett JA considered the particular facts and circumstances of the sale before concluding that the vendors’ marketing of the property did not constitute conduct ‘in trade or commerce’.  

As to the vendors’ use of real estate agents (whose own business is ordinarily ‘in trade or commerce’), Emmett JA said at [38]:  

“The mere use of an estate agent does not bring about the result that the sale of a capital asset by a householder is a transaction occurring in trade or commerce”.  

It had been accepted that the acts performed by the agent were done with the authority of the vendors.  Whilst the acts of the agent could therefore be imputed to the vendors, Emmett JA said that the ‘business character’ of the acts done by the agent could not be imputed to the acts of the vendors.  At [34]:  

“…the element of acting in trade or commerce will not be attributed to owners selling their home merely by reason of their engagement of an estate agent to find a buyer”.   

What does this mean?  

Although the Court of Appeal’s observations on proportionate liability and the Australian Consumer Lawwere made in obiter, the observations were made by a three judge bench and are, in the authors' view, a straight line application of the High Court’s decision in Selig.  

The proportionate liability regime was introduced to avoid the ‘deep-pocket syndrome’ whereby professionals with insurance were being targeted for 100% of a plaintiff’s loss, when they were only responsible for a portion of that loss. This decision makes it difficult to see any circumstance where a real estate agent will be able to obtain the benefit of apportionment.  

Ordinarily a plaintiff will plead multiple causes of action arising from the same facts when pursuing a claim against a defendant.  To avoid the operation of proportionate liability under the Australian Consumer Law, and obtain 100% of their loss, a plaintiff will need to identify a cause of action which is outside s18.  In the context of a claim against a real estate agent, this will not be difficult as the exact same conduct by a real estate agent will trigger both s18 and s30.   

On the basis then that plaintiffs properly bring claims under s30 rather than s18, there will be very few circumstances where a real estate agent will gain the benefit of proportionate liability.  

As to the Court of Appeal’s findings on ‘in trade or commerce’, the case provides a basis from which vendors can argue that there is an assumption that a residential sale will not carry the business character required to trigger s18 and s30, even where that sale is marketed publically through an agent.  The practical implication for vendors and real estate agents is that there is an aligned interest in pleading agency to defeat a claim by a purchaser.