160515 proportionate liability paper
TRANSCRIPT
GREG LAUGHTON SC
SYDNEY
Selborne Chambers
174 Phillip Street, Sydney 2000
DX 394 Sydney
Telephone: + 61(0) 29233 8796
Facsimile: + 61(0)29221 4196
Email: [email protected]
LONDON
1 Gray’s Inn Square
Gray’s Inn, London WC1R 5AA
DX 1013 Chancery Lane
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PROPORTIONATE LIABILITY: NAVIGATING
THE DIFFICULT AREAS OF
UNCERTAINTY IN THE LAW
Background
1. Prior to 2001 in Australia, the cost of liability insurance developed into a
crisis, caused by claims made for various types of risk, including:
1.1 personal injury caused by negligence;
1.2 professional indemnity for:
1.2.1 medical practitioners;
1.2.2 legal practitioners;
1.2.3 professions associated with the construction industry such as
engineers and architects;
1.3 financial and other related services.
2. Most commentators suggest that the crisis had five fundamental causes:
2.1 A significant number of insurers in the liability insurance market were
competing for a comparatively small amount of insurance business.
2.2 Competition drove insurance premiums down, which meant insurers
needed to find other ways to meet the difference between premium
income and claims payouts.
2.3 Insurers had become too reliant upon investing premium income in
high yield investments in order to cover claims and the yields began to
slow down leading up to 2001.
2
2.4 Premiums relied upon in a competitive insurance market were too low
compared to claims payouts, and investment income generated by the
insurers was too low to make up the short fall.
2.5 The rapid increase in the number and size of verdicts in favour of
litigants, particularly in personal injury claims, substantially increased
the amount of premium income being used to discharge liability from
the large verdicts awarded.
3. The result was that a number of large insurers, particularly in the public
liability and professional negligence markets, either withdrew from the market
altogether or were extremely conservative in the risks which they underwrote.
4. In the lead up to the insurance crisis, HIH had been writing insurance for the
risks that other insurers were actively avoiding, still at very low premiums
when compared to the risks that it was insuring.
5. In addition, HIH took over a number of insurers, including FAI, and therefore
reduced the number of insurers on the market.
6. The industry statistics showed that the premium levels were unsustainable. In
the period leading up to its collapse in 2001, HIH was actively increasing its
market share, particularly in the public liability and professional negligence
market.
7. By early 2000, HIH had identified that it had a problem, and significantly
reduced its involvement in the market.
8. Those few insurers which remained in the market started to set economically
realistic premiums for the risks that they were being asked to insure. The
result was a huge increase in premiums, particularly for public liability cover.
9. Businesses which had high public throughput such as:
9.1 hotels;
9.2 licensed clubs; and
9.3 shopping centres,
were hit hard.
10. The retail industry particularly suffered. Small businesses began to close
because the cost of insurance made them unprofitable.
11. Also, community organisations, such as:
11.1 event organisers;
3
11.2 sports organisations;
11.3 community events; and
11.4 local government community groups,
suffered.
12. HIH masked the problem of a lack of a premium income compared to the
increasing risks for insurers and the escalating payouts. Added to that, the
higher administrative costs and, some suggested, much higher legal fees, made
the sector a recipe for disaster.
13. From about 1996 to 2001, Statements of Claim filed in the District Court of
New South Wales Sydney Registry alleging personal injury arising from
occurrences which were defined as public liability claims by the insurers,
increased by about 15% in each year.
14. The message from business was that insurance was too expensive. A number
of enquiries were commenced by Government:
14.1 the Royal Commission into the collapse of HIH;
14.2 a Senate Review, which established the Ipp Expert Panel, then chaired
by Justice David Ipp, to report on insurance and tort liability.
15. “The Ipp Report” contained a number of recommendations, which included
replacing joint and several liability with proportionate liability in order to
spread the liability for the payment of claims across a wider group.
16. As a result of the Ipp Report, all of the Australian States and Territories passed
legislation which, commentators suggest, codified fundamental concepts such
as:
16.1 when a duty of care arises;
16.2 what constitutes a breach;
16.3 causation.
17. In addition, the legislation created a regime of proportionate liability.
18. All of the Australian States and some Commonwealth Acts have enacted
proportionate liability provisions which have created reasonably consistent,
although, in some jurisdictions, different, models for the determination of
proportionate liability.1
1 Wrongs Act, 1958 (Vic); Civil Liability Act, 2002 (WA); Civil Liability Act, 2003 (Qld); Civil Law
(Wrongs Act) 2002 (ACT); Proportionate Liability Act, 2005 (NT); Civil Liability Act, 2002 (Tas);
4
The Categories of Proportionate Liability Cases
19. There are three broad circumstances in which a defendant can assert that a
claim is apportionable:
19.1 a claim for a breach of duty of care under the Civil Liability Act, 2002
(NSW) and the similar Acts in the States or Territories for non-
personal injury claims;
19.2 a claim for misleading and deceptive conduct in trade or commerce in
breach of S18 of the Australian Consumer Law; and
19.3 a claim made for misleading and deceptive conduct about a financial
product or a financial service under the Corporations Act, 2001 (Cth)
(‘Corporations Act’) and the Australian Securities and Investments
Commission Act, 2001 (Cth) (‘ASIC Act’).
Position at Common Law
20. At common law, there are three main categories of multiple tortfeasors:
20.1 joint tortfeasors, where two or more persons acting together caused the
same damage;
20.2 several concurrent tortfeasors, where two or more persons act
separately but whose acts or omissions caused the same damage; and
20.3 several tortfeasors who caused different damage, that is, two or more
persons not acting together and who caused different damage.
21. The apportionment legislation applies to joint tortfeasers and several
concurrent tortfeasors.
22. A defendant’s liability may be solidary or proportionate.
23. At common law, judgment against any one or more tortfeasors discharged the
liability against those whom judgment had not been obtained.2
24. Any tortfeasor who satisfied a judgment in favour of the plaintiff could not, in
general, recover contribution from any other tortfeasor.3
Law Reform (Contributory Negligence and Apportionment of Liability) Act, 2001 (SA); Civil Liability
Act, 2002 (NSW); Amendments to the Trade Practices Act, 1974 (Cth) now Australian Competition
and Consumer Law (Cth); Corporations Act, 2001 (Cth); Australian Securities and Investment
Commission Act, (Cth); Australian Consumer Law (Cth) 2 Brinsmead v Harrison (1872) LR7CP 547. Although in The Koursk [1924] P140 judgment against
one of several concurrent Tortfeasors did not discharge the liability of the others 3 Merryweather v Nixan (1799) 8 Tern.Rep 186
5
25. In Australian jurisdictions, legislation provided that judgment against one
tortfeasor did not bar an action against any other person who would, if sued,
have been liable to the plaintiff as a tortfeasor for the same damage.4
26. If the plaintiff brings more than one action to the same damage, the amount
recoverable under the judgments given in subsequent actions cannot exceed in
aggregate the amount of damages awarded in favour of the plaintiff against the
first defendant.
27. In all Australian jurisdictions, any tortfeasors found to be liable for damage
may recover contribution from any other tortfeasor who is, or, if sued by the
plaintiff, would have been found to be, liable for the same damage, whether as
a joint tortfeasor or otherwise.5
28. In contribution proceedings, the amount of the contribution recoverable from
another tortfeasor is what the Court finds to be just and equitable having
regard to the extent of that tortfeasor’s responsibility for the damage.
29. The plaintiff who sues only one defendant will recover the full amount of the
damages regardless of how many other defendants could have been sued. If
that defendant is unable to satisfy the judgment, the plaintiff’s right to proceed
against other defendants is preserved.
30. The tortfeasor in the first action may also seek contribution from any other
tortfeasor who would if sued have been liable. The right to contribution does
not reduce the defendant’s liability to the plaintiff, and is solidary liability,
under which the plaintiff’s right to full recovery is preserved.
31. Apportionment only operates at common law between the defendants.
Proportionate Liability
32. The principle of solidary liability has been replaced by the concept of
proportionate liability in unintentional property damage and pure economic
loss claims, where each defendant is liable to the plaintiff to the extent of his,
her or its apportioned share of responsibility.
4 See for instance Civil Law (Wrongs) Act, (2002) (ACT) Ch2 Pt2.5; Law Reform (Miscellaneous
Provisions) Act, 1965 (NSW) S11 5 See for instance Wrongs Act, 1958 (Vic) ss23B; 24AD(4), which provides that the right to recover
contributions supersedes other rights to contributions; Law Reform (Miscellaneous Provisions) Act,
1965 (NSW) S12; Law Reform (Miscellaneous Provisions) Act, 1946 (NSW) S5(1)(c)
6
33. In all jurisdictions, legislation provides for proportionate liability to apply to
apportionable claims.6
34. Apportionable claims include claims involving economic loss or property
damage in negligence actions, but do not include claims for personal injury or
death, including actions under Fatal Accidents Legislation.
35. In some jurisdictions, the legislation confines the application to property
damage and economic loss other than economic loss caused by personal
injury. Other jurisdictions simply make it clear that personal injury claims and
claims arising out of personal injury are outside the application of the
apportionment liability principles.
36. Proportionate liability casts the duty of recovering any verdict on the plaintiff,
meaning a single defendant does not bear the duty of recovering contribution
from other defendants. It casts the risk on the plaintiff that if one or more of
the defendants who contributed to the damage is impecunious and/or
uninsured, or in the case of a natural person, deceased and uninsured, they will
not be able to fully recover the loss.
37. In those circumstances, the plaintiff will only recover from the insured or
solvent defendants, whereas under the solidary liability principles, the
defendant against which primary liability was found is liable for the full
amount of the judgment, and bears the risk that the other contributing
defendant or defendants may not be able to pay their respective
contribution(s).
38. In most jurisdictions, while a claim for damage may be based on more than
one cause of action, such as contract and tort, there is one apportionable claim
for that damage.7
39. In proceedings involving mixed claims, liability in the apportionable claim is
decided according to the legislation and liability in the other claim or claims is
decided according to the law applicable to that cause of action.8
6 Civil Law (Wrongs) Act, (2002) (ACT) Ch 7A; Proportionate Liability Act, 2005 (NT) Pt 2; Civil
Liability Act, 2002 (NSW) Pt4; Civil Liability Act, 2003 (Qld) Ch2 Pt2; Law Reform (Contributory
Negligence and Apportionment of Liability) Act, 2001 (SA) Pt3; Civil Liability Act (2002) (Tas) Pt9A;
Wrongs Act, 1958 (Vic) Pt IV AA; Civil Liability Act, 2002 (WA) Pt1F 7 See for instance, Civil Liability Act, 2002 (NSW) S34 (1A) 8 See for instance, Civil Liability Act, 2002 (NSW) S35(2)
7
40. Proportionate liability fundamentally alters the relationship between a plaintiff
and a concurrent wrongdoer under a regime based on solidarity liability.9
41. The principle of proportionate liability reflects the legislative views about the
allocation of risk between plaintiffs and defendants in claims for personal
injury on the one hand and claims for property damage and economic loss on
the other.10
42. Proportionate liability principles require the plaintiff to sue each concurrent
wrongdoer separately and to recover a separate judgment determined
according to the relative culpability of each of the tortfeasors.
43. In all jurisdictions, in proceedings in which an apportionable claim is
involved, the defendant who is a concurrent wrongdoer is only liable for that
amount which reflects the proportion of damage that the Court regards as just,
after considering the extent of that defendant’s responsibility for the damage.
44. The legislature has used almost identical language in the proportionate liability
provisions as it did in the contributory negligence legislation. It is therefore
legitimate to take into account the approaches adopted by Appellate Courts to
construe and apply the statutory provisions creating proportionate liability.11
Apportionable Claim
45. The wording of the legislation in the jurisdictions as to what constitutes an
apportionable claim is similar. The Civil Liability Act 2002 (NSW) (‘CLA’)12
provides that apportionable claims are:
45.1 claims for economic loss or damage to property and actions for
damages (whether in contract tort or otherwise) arising from the failure
to take reasonable care, but not including any claim arising out of
personal injury;
45.2 claims for economic loss or damage to property and actions for
damages under the Fair Trading Act, 1987 for a contravention of S42
of that Act (as in force before it is repealed by the Fair Trading
Amendment (Australian Consumer Law) Act, (2010)), or under the
9 Gunston v Lawley (2008) 20VR 33 at 49-50; Byrne J 10 Reinhold v New South Wales Lottery Corporation (No.2) [2008] NSW SC 187 at [31]; Barrett J 11 Reinhold v New South Wales Lottery Corporation (No.2) [2008] NSW SC 187 at [60]; Barrett J 12 S34(1)
8
Australian Consumer Law (ACL) for a contravention of S18 of that
law.13
46. There is a single apportionable claim in proceedings for the same loss or
damage, even if the claim for loss or damage is based on more than one cause
of action, whether or not of the same or different kind. That is, if the same
damage is caused by multiple breaches of the duty to take reasonable care,
even if the loss or damage was caused as a consequence of more than one
cause of action, irrespective of whether the causes of action were the same or
different. For instance, the same damage to a property developer could have
been caused by incorrect advice given as a consequence of a breach of the
duty to take reasonable care by:
46.1 a solicitor;
46.2 an architect;
46.3 an engineer,
all of whose acts or omissions combined to cause a loss of value of property.
The Test of What Constitutes an Apportionable Claim
47. The test for an apportionable claim is whether the claim is based on the failure
of a defendant to take reasonable care, irrespective of whether the pleading
contains an allegation that the defendant has failed to take reasonable care.
48. In Solak v Bank of Western Australia,14
in determining whether or not a
proceeding related to an apportionable claim under Part IV AA of the Wrongs
Act (Vic) and similar regimes, Pagoni J said15
“the factual precondition to the
operation of the...statutory regimes does not depend upon how a claim is
pleaded but whether the statutory precondition exists, namely whether the
claim arises from a failure to take reasonable care.”
49. In Dartberg Pty Ltd v Wealthcare Financial Planning16
Middleton J said:
“the words arising from the failure to take reasonable care should be
interpreted broadly. In my view, the state regimes providing for the
apportionment of liability between concurrent wrongdoers requires a broad
13 S42 of the Fair Trading Act and S18 of the ACL provides: “S18 (1) a person must not in trade or
commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive; S18(2)
nothing in part 3-1 (which is about unfair practices) limits by implication (subsection 1)” 14 (2009) VSC 82 15 [35] 16 [2007] FCA 1216
9
interpretation of the condition upon which the apportionment provision
depends to enable Courts to determine how the claim should be apportioned
between those found responsible for the damage. The policy in the legislation
is to ensure that those in fact who cause the actionable loss are required to
bear the portion of the loss referable to their cause. That task ought not to be
frustrated by arid disputes about pleadings.”
Concurrent Wrongdoers
50. To have its liability apportioned, a wrongdoer must establish that another party
or parties is or are “concurrent wrongdoers”, as defined by the apportionment
legislation, by establishing that the acts or omissions of other parties caused or
contributed to the loss or damage which is the subject of the claim and
includes concurrent wrongdoers who are insolvent; bankrupt; being wound up
or dead.
51. A concurrent wrongdoer is defined in the New South Wales and
Commonwealth Legislation as “a person who is one of two or more persons
whose acts or omissions (or act or omission) caused, independently of each
other or jointly, the damage or loss that is the subject of the claim.”17
52. In Hunt and Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd18
(‘Hunt and
Hunt’), the majority held, in determining whether a person is a concurrent
wrongdoer, two questions must be answered:
52.1 what is the damage or loss that is the subject of the claim, and
52.2 is there a person, other than the defendant, whose act or omission also
caused that damage or loss?
53. In determining the damage or loss, the majority in Hunt and Hunt held that
“damage, properly understood, is the injury or other foreseeable
consequences suffered by a plaintiff” and that “in the context of economic
loss, loss or damage may be understood as the harm suffered to a plaintiff’s
economic interests.”19
17 CLA S342; Australian Securities and Investment Commission Act, 2001 (Cth) S12 GP(3);
Corporations Act, 2001 (Cth) S1041 L(3); Trade Practices Act, 1974 (Cth) 18 [2013] HCA 10 19 Hunt and Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 at [24]
10
54. The interpretation of the provision by the High Court indicates a broader
construction of concurrent wrongdoing than had previously been adopted by
the intermediate Appellate Courts in Australia.20
Procedural Matters
55. The defendant bears the onus of establishing the basis upon which a Court
should order that the defendant’s liability be limited.
56. The defendant must plead the following elements in its defence:
56.1 the existence of a particular person;
56.2 the occurrence of an act or omission by that particular person;
56.3 a causal connection between that occurrence and the loss that is the
subject of the claim.21
57. Based on Ucak v Avante Developments Pty Limited (‘Ucak’),22
a defence
must be pleaded and particularised in exactly the same way and with the same
degree of precision as would have been required had the matter been raised by
way of cross claim.
58. Ucak has been followed in other matters including HSD Co Pty Ltd v Maus
Financial Management Pty Ltd 23
and Perpetual v CTC.24
59. The CLA provides that a defendant must notify the plaintiff of concurrent
wrongdoers or face cost penalties.25
60. The defendant needs to provide the plaintiff with proper notice of the identity
of the concurrent wrongdoers and the reasons apportionment should be made.
61. The plaintiff is entitled to know the facts and other matters upon which the
defendant asserts that its liability should be reduced. The same provisions are
contained in the legislation of all Australian jurisdictions, including the
Commonwealth, except Victoria.26
62. Defendants have the advantage under the proportionate liability provisions
that they can plead that a party is a concurrent wrongdoer without having to
20
http:/www.ags.gov.au publication commercial/notes/CN38.pdf 21 Ucak v Avante Developments Pty Ltd [2007] NSW SC 367 22 Ucak v Avante Developments Pty Ltd [2007] NSW SC 367 23 [2008] NSW SC 24 [2013] NSWCA 58 25 Civil Liability Act, 2002 (NSW) S35A 26 Wrongs Act, 1958 (Vic)
11
join the wrongdoer to the proceedings. It eliminates the need to file cross
claims and to be exposed to possible cost consequences which may follow.
63. Once a concurrent wrongdoer is identified, it is then up to the plaintiff to join
the wrongdoer as a defendant to the proceedings. If the plaintiff seeks to
recover 100% of his or her loss, the plaintiff must claim against all possible
wrongdoers. Otherwise, a plaintiff will risk having the contribution of non-
parties taken into account to reduce the liability of the defendants.
64. The Acts of each of New South Wales, Queensland, Territories and the
Commonwealth Acts give a Court the discretion to have regard to the liability
of persons who have not been joined in the action.27
The Legislation applied to persons who Jointly Cause Loss
65. In all jurisdictions except Queensland and South Australia, the legislation
applies to persons who, either independently of each other, or jointly, caused
the loss or damage claimed.28
66. In Hunt and Hunt,29
under the legislative provisions in New South Wales,
which also provide for joint loss or damage caused independently of each
other, or jointly, it is not necessary that the wrongdoers cause the “same
damage” but only that each wrongdoer materially contributed to the loss of
damage suffered.
Other Matters Relating to Contribution30
67. Proportionate liability arises only where permitted by the legislation:
67.1 common law failure to take care, or misleading or deceptive conduct in
contravention of the Fair Trading/Australian Consumer Law
provisions.
67.2 If it does not involve a failure to take care which causes the damages
claimed or the defendant’s misleading or deceptive conduct, the claim
is not capable of being apportioned.31
27 For instance Civil Liability Act, 2002 (NSW) S35(3)(b); Corporations Act, 2001 S1041 N(3)(b);
Australian Securities and Investment Commission Act, 2001 S12GR(3)(b) 28 CLA S34(2); Australian Consumer Law S87CB (3); Competition and Consumer Act, 2010;
Corporations Act S2041 L(3); ASIC Act S12GP (3) 29 [2013] HCA 10 para 45 30 Holsbury’s 300 - 138 p547, 365 31 Commonwealth Bank v Witherow [2006] VSCA [45] (where a claim by lender against a guarantor
was held to be not proportionate)
12
The Australian Competition and Consumer Law32
68. Under the Australian Competition and Consumer Act, 2010 (Cth) (‘the CC
Act’) S87CB, a claim is apportionable if it is “a claim for damages made
under S236 of the CC Act, for: (a) economic loss or (b) damage to property,
caused by conduct that was done in contravention of S18” of the CC Act.
69. The section is not worded to refer to a “claim for contravention of S18” but
“a claim…caused by conduct that was done by contravention of S18”.
Section 18 of the Australian Consumer Law
70. Section 18 provides:
“Misleading or deceptive conduct
18 (1) a person must not, in trade or commerce, engage in conduct that is
misleading or deceptive or is likely to mislead or deceive;
(2) nothing in part 3-1 (which is about unfair practices) limits by implication
subsection (1)”
Section 236 of the Australian Consumer Law
71. Section 236 of the Australian Consumer Law provides:
“Actions or Damages:
(1) If:
(a) A person (the claimant) suffers loss or damage because of the conduct
of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action
against that other person, or against any person involved in the
contravention.
(2) An action under subsection (1) may be commenced at any time within 6
years after the day on which the cause of action that relates to the conduct
accrued.”
72. The same approach to the construction of the apportionment legislation set
forth in paragraphs 45 to 47 above will apply to the construction of the CC Act
S87CB. It does not matter whether a breach of the Australian Consumer Law
S18 is expressly pleaded. What matters is whether, in substance, the claim is
32 http://ww.ags.gov.au/publications/commercial - notes/c38pdf
13
one which can be properly characterised as caused by conduct that is
misleading or deceptive.
Claims in Contract
73. In Reinhold v New South Wales Lottery Corporation (No. 2)33
the respondent
argued34
that a claim for breach of contract was not “arising from a failure to
take reasonable care.”
74. The contractual term, the subject of the dispute, dealt with the cancellation of
the contract, regardless of questions of want of care.
75. A claim under apportionment legislation could only be made for breach of the
contractual term which expressly or impliedly required that reasonable care be
taken. Barrett J35
found that there was a breach of the contractual term
because of the conduct of the respondent which involved a want of care
amounting to a breach of the duty of care in negligence. Barrett J said:36
“the breaches of contract to which the cancellation of Ticket B gave rise were
of the same character as the negligence. Each had as its central element a
failure to take reasonable care. The case was thus one in which each relevant
‘claim’, as determined by the Court and according to the findings actually
made, was a claim in an action for damages ‘arising from’ the failure to take
reasonable care that was also at the centre of the tortious claim in negligence.
This is so of both the claims in tort and the claims in contract. That, in my
view, is sufficient to bring the contract claims, as well as the tort claims within
S34(1)(a) [CLA] and it makes no difference that the breaches of contract as
alleged were not framed in terms of failure to take reasonable care.”
The Corporations Act
76. The proportionate liability regime applies to any claim brought against the
party that is an apportionable claim defined in similar terms to the
apportionment legislation.
77. S1041L of the Corporations Act, 2001 defines an apportionable claim as one
being made under S1041I for economic loss or property damage caused by
conduct that was in contravention of S1041H.
33 Reinhold v New South Wales Lottery Corporation (No.2) [2008] NSW SC 187 at [60] 34 At [2008] NSW SC 187 at [25] 35 At [2008] NSW SC 187 at [26] 36 At [2008] NSW SC 187 at [26]-[27]
14
Section 1041H of the Corporations Act, 2001 (Cth)
78. The Corporations Act, 2001 (Cth) S1041H provides:
“1. A person must not in this jurisdiction, engage in conduct in relation to a
financial product or a financial service, that is misleading or deceptive or is
likely to mislead or deceive
2. the reference in sub-section 1 to engage in conduct in relation to a financial
product includes (but is not limited to) any of the following:
(a) dealing in a financial product;
(b) without limiting (a):
(i) issuing a financial product;
(ii) publishing a notice in relation to a financial product;
(iii) making, or making an evaluation of, an offer under a takeover
bid or a recommendation relating to such an offer;
(iv) applying to become a standard employer/sponsor within the
meaning of the Superannuation Industry (Superannuation) Act, 1993 of
a superannuation entity (within the meaning of that Act)
(v) permitting a person to become a standard employer/sponsor
(within the meaning of the Superannuation Industry (Superannuation)
Act, 1993 of a superannuation entity (within the meaning of that Act)
(vi) a trustee of a superannuation entity (within the meaning of the
Superannuation Industry (Superannuation) Act, 1993) dealing with a
beneficiary of that entity as such a beneficiary;
(vii) a trustee of a superannuation entity (within the meaning of the
Superannuation Industry (Superannuation) Act, 1993) dealing with an
employer/sponsor (within the meaning of that Act) or associate (within
the meaning of the Act) of an employer/sponsor of that entity as such
an employer/sponsor or associate;
(viii) applying on behalf of an employee (within the meaning of
Retirement Savings Accounts Act 1996, for the employee to become the
holder of an RSA Product, an RSA Provider within the meaning of the
retirement savings accounts act, 1997, dealing with an employer
(within the meaning of that Act), or an associate (within the meaning of
that Act) as an employer who makes an application, on behalf of an
15
employee (within the meaning of that Act), the employer for the
employee to become the holder of an RSA product such as an
employer;
(x) carrying on negotiations, or making arrangements or doing
any other act, preparatory to, or in any way related to an activity
covered by any of sub-paragraphs (i) to (x)”
S1041L of the Corporations Act, 2001 (Cth)
79. “(1) This Division applies to a claim (an apportionable claim) if the claim is
a claim for damages made under section 1041I for:
(a) economic loss; or
(b) damage to property;
caused by conduct that was done in a contravention of section 1041H.
(2) For the purposes of this Division, there is a single apportionable claim in
proceedings in respect of the same loss or damage even if the claim for the
loss or damage is based on more than one cause of action (whether or not of
the same or a different kind).
(3) In this Division, a concurrent wrongdoer , in relation to a claim, is a
person who is one of 2 or more persons whose acts or omissions (or act or
omission) caused, independently of each other or jointly, the damage or loss
that is the subject of the claim.
(4) For the purposes of this Division, apportionable claims are limited to
those claims specified in subsection (1).
(5) For the purposes of this Division, it does not matter that a concurrent
wrongdoer is insolvent, is being wound up or has ceased to exist or died.”
80. Subsection 1041L(4) emphasises that apportionable claims are limited to those
specified in subsection 1041L(1).
Definitions under the Corporations Act
81. By 763A of the Corporations Act, 2001 (Cth): “a financial product is a
facility through which, or through the acquisition of which, a person does
more or one of the following:
(a) makes a financial investment (see S763B);
(b) manages financial risk (see S763C);
(c) makes non-cash payments (see S763D);
16
(2) A particular facility that is of a kind to which people make financial
investments, manage financial risks or make non-cash payments is a financial
product even if that facility is acquired by a particular person for some other
purpose.
(3) A facility does not cease to be a financial product merely because:
(a) The facility has been acquired by a person other than the person to
whom it was originally issued; and
(b) that person in acquiring the product was not making a financial
investment or managing a financial risk”
82. By S766A of the Corporations Act 2001, (Cth): “…a person provides a
financial service if they:
(a) provide financial product advice (see Section 766B); or
(b) deal in a financial product (see Section 766C); or
(c) make a market for a financial product (see Section 766D); or
(d) operate a registered scheme; or
(e) provide a custodial or depository service (see Section 766E); or
(f) engage in conduct of a kind prescribed by regulations made for the
purposes of this paragraph.”
83. A ‘single apportionable claim’ comes into play when a plaintiff has two or
more causes of action giving rise to the same loss or damage, one of which is
apportionable under a statutory proportionate liability regime and the other
which is not.
Exclusions from S1041H
84. Certain conduct is excluded from S1041H:
81.1 Conduct prohibited by S670A:
Documents that contain certain deficiencies such as a misleading or
deceptive statement, an omission from the document, a new circumstance
that has arisen since the document was lodged and would have been
required to be included in the document if it had arisen before the
document was lodged, or an omission from the report of material required
to be disclosed by law must not be given. The documents referred to
under this section include a bidder’s statement, a takeover document, a
notice of variation of a takeover offer, a target’s statement, a compulsory
17
acquisition notice, a compulsory buy-out notice and a report
accompanying a statement or notice.
81.2 S728 of the Corporations Act:
A person must not offer securities under a disclosure document if the
documents contain a misleading or deceptive statement, an omission from
the disclosure document of material required by law, or where a new
circumstance has arisen since the disclosure document was lodged and
would have been required by law to be included in the disclosure
document if it had arisen before the disclosure document was lodged. The
documents referred to under this section include the disclosure document,
any application form that accompanies the disclosure document, and any
document that contains the offer if the offer is not in the disclosure
document or the application form.
81.3 S1021 NA of the Corporations Act:
… a failure to comply with obligations to make product dashboard
publicly available. Under this section, a person commits an offence if the
person is a trustee of a regulated superannuation fund and is required to
ensure that a product dashboard for each of the fund’s MySuper products
and choice products is made publicly available on the fund’s website, and
a product dashboard for each of the fund’s MySuper products and choice
products is not made publicly available as required by that section.
Accordingly, a person as trustee also commits an offence where a product
is made publicly available on the fund’s website and the information set
out has not been updated, is otherwise misleading or deceptive, or there is
an omission from the information set out in the product dashboard.
81.4 S1021NB of the Corporations Act:
…a failure to comply with obligations to make information publicly
available. Under this section, a person commits an offence if the person is
a trustee or a registrable superannuation entity and the person is required
by law to make the information publicly available on the entity’s website,
and the information is not made publicly available as required by that
section. Accordingly, a person as trustee also commits an offence if the
information is made publicly available in purported compliance with that
18
requirement and the information is misleading or deceptive, or there is an
omission from that information.
81.5 S1021NC of the Corporations Act:
…a failure to notify another person under sections 1017BC (general rule
about giving notice and providing information), 1017BD (giving notice to
providers under custodial arrangements), 1017BE (giving notice to
acquirers under custodial arrangements). Under this section, a person
commits an offence for failing to notify another person under section
1071BC, 1017BD or 1017BE, and the person is not taken to have notified
the other person as required by that provision. Accordingly, a person also
commits an offence if the person notifies another person of information as
required by this section, and that information is misleading or deceptive, or
there is an omission from the information provided.
81.6 Conduct in relation to disclosure documents or statements as defined in
SS953A. In this subdivision:
““Defective” in relation to a disclosure document means:
(a) if the disclosure document or statement is a Financial Services
Guide, a Supplementary Financial Services Guide, or is
information or a statement required by S941C(5), 941C(7) or
941D(2)
(i) there is a misleading or deceptive statement in the
disclosure document or statement; or
(ii) if it is a Financial Services Guide, there is an omission
from the Financial Services Guide of material required by
S942B or 942C; or
(iii) if it is a Supplementary Financial Services Guide that is
given for the purposes of paragraph 941F(d), there is an
omission from the Supplementary Financial Services Guide
of material required by that paragraph; or
(iv) if it is information or a statement required by S941C(5).
S941C(7) or 941D(2), there is an omission from the
document or statement of material required by that
subsection; or
19
(b) if the disclosure document or statement is a Statement of Advice, or
is information, a statement or a copy of a record required by
S946AA(5), 946B(3), (6) or (8) or 946C(2):
(i) there is a misleading or deceptive statement in the
disclosure document or statement; or
(ii) if it is a Statement of Advice, there is an omission from the
Statement of Advice of material required by S947B, 947C
or 947D; or
(iii) if it is information, a statement or a copy of a record
required by S946AA(5), 946B(3), (6) or (8) or 946C(2),
there is an omission from the information, statement or
copy of material required by that subsection or section.
“Disclosure document or statement” means
(a) a Financial Services Guide; or
(b) a Supplementary Financial Services Guide; or
(c) a Statement of Advice; or
(d) information, a statement or a copy of a record required by S941C(5)
or (7), 941D(2), 946AA(5), 946B(3), (6) or (8) or 946C(2).”
81.7 S1041H also excludes conduct associated with disclosure documents or
statements as defined in S1022A. In this subdivision:
81.7.1 “Defective” in relation to a disclosure document means that there is
a misleading or deceptive statement in the disclosure document or
statement, or there is an omission from the Product Disclosure Statement
of material required by law.
81.7.2 “Disclosure document or statement” means a Product Disclosure
Statement, information required by law, an offer document of a kind
referred to in Section 1019E (requirements for making offers under Div),
or a supplementary offer document of a kind referred to in section 109J
(obligations to update market value).
20
The High Court in Selig v Wealthsure Pty Ltd37
Facts
85. Selig invested in Neovest Limited on the advice of an authorised
representative of Wealthsure Pty Ltd (Wealthsure), which held an Australian
Financial Services License.
86. The scheme proposed in the prospectus issued by Neovest was, in effect, a
“Ponzi scheme”. Neovest became insolvent and Selig lost its investment and
suffered consequential losses.
87. Norton Capital Pty Ltd participated in the promotion of the investment in
Neovest, and Mark Northern and Peter Townley, a solicitor, were directors of
Neovest, together with two other directors.
88. Selig joined all of those parties as defendants to the proceedings, together with
the other partners of Peter Townley’s law firm.
89. The primary judge made findings against Neovest, Norton Capital and the two
other directors of Neovest. Judgment was not entered against any of those
parties because they were either in liquidation or bankrupt respectively. His
Honour dismissed the claims against Peter Townley’s partners. Selig’s claims
against Neovest and Mark Northern and Peter Townley were based upon
contravention of the Corporations Act and the ASIC Act including S1041H of
the Corporations Act, 2001 and its analogue S12DA of the ASIC Act.
90. S12DA of the ASIC Act prohibits conduct of the same kind prohibited by
S1041H(1) of the Corporations Act, but in trade or commerce, in relation to
financial services.
91. Importantly, Selig also alleged that Neovest and Norton Capital had breached
the retainer and the duty of care they owed to Selig as providers of financial
advice.
92. Each of Neovest; Norton Capital; Mark Northern and Peter Townley asserted
that any liability to Selig was limited to a proportion of Selig’s loss and
damage and relied upon the proportionate liability provision of Div 2A of the
Corporations Act, and the corresponding provision of the ASIC Act, Pt2 Div 2,
subdiv. GA
37 [2015] HCA 18 (13 May 2015)
21
93. The primary judge entered judgment against each of Neovest; Norton Capital;
Mark Northern and Peter Townley, on the basis that each of them was liable to
Selig for the whole of the damage suffered by it, and declined to enter
judgment on the basis of proportionate liability for the loss and damage.
94. The primary judge held that Div.2A applied only where there had been a
contravention of S1041H and that it had no application where a plaintiff
succeeded on other statutory and common law causes of action for which a
defendant is liable for the whole damage.
95. The Full Court of the Federal Court allowed the appeal and apportioned
liability.
96. A short time after the full Federal Court entered judgement on an
apportionment basis, a differently constituted full Court delivered judgment in
ABN Amro Bank NV v Bathurst Regional Council38
and adopted the view
expressed by the primary judge in Selig, and the dissenting Full Court judge in
Selig.
97. The High Court held39
that “an ‘apportionable claim’ for the purposes of Div.
2A is relevantly a claim based upon a contravention of S1041H. The term
does not extend to claims based upon conduct of a different kind.”
98. Therefore an apportionable claim for the purposes of the Corporations Act and
the ASIC Act is confined to claims for misleading and deceptive conduct.
99. Claims in professional negligence and breach of retainer are not apportionable
claims for the purposes of either Act.
100. In the view of the High Court, it would be inconsistent with SS1041H(1) and
1041L(4) to interpret the word “claim” in subsection 1041L(2) as extending or
completing the meaning of “apportionable claim”. The term apportionable
claim serves to explain that a plaintiff can advance various causes of action
based on a contravention of S1041H, but as long as they concern the same loss
and damage, those causes of action will constitute only one claim for the
purpose of apportioning liability between wrongdoers.
101. Selig confirms the limited scope of the proportionate liability regime contained
in the Corporations and ASIC Acts.
38 [2014] FCAFC 65 39 Selig v Wealthsure Pty Ltd (2015) HCA 13 May 2015 [37]
22
102. While the judgment of the High Court related only to those two regimes, the
same limitation on the interpretation is likely to be made about the equivalent
provisions of the Trade Practices Act and its successor, the Competition and
Consumer Act, 2010.
103. On one view, the decision undermines the purpose of proportional liability,
which is to confine the liability of the defendant to the proportion of the
liability for the loss which that defendant has caused.
104. The point made in both Selig and ABN Amro Bank NV v Bathurst Regional
Council 40
is that conduct which falls outside of S1041H involves a higher
level of moral culpability which is undeserving of the benefit afforded to
wrongdoers by the proportionate liability regime.41
The Court in Selig stated:
“It was observed by the Full Court in ABN AMRO Bank NV v Bathurst
Regional Council that contraventions of the other provisions referred in
S1041I, which were not chosen as being capable of being the subjects of an
apportionable claim, involve a higher level of moral culpability and the
conduct referred to in S1041H. Unlike S1041H, contravention of S1041E-
1041G constitutes an offence, an element of which is knowledge or
recklessness. The fact that apportionment is a benefit to wrongdoers may
have weighed in the decision to limit apportionable claims to those involving
in conduct of the kind to which S1041L refers.”42
105. Plaintiffs benefit from the certainty that they can plead other causes of action
alongside an apportionable misleading and deceptive conduct claim, without
those other causes of action being regulated by the proportionate liability
regime. In those circumstances, non-apportionable claims are likely to
dominate or at least come in for closer attention. Deprived of a possible
apportionable defence, wrongdoers will need to find other ways of sharing
their potential liability, to be recovered by way of contribution and grappling
with the difficult choice of law issues which will often prevail in determining
the contribution regime or cross claim and deciding when claims ought to be
brought.
40 [2014] FCAFC 65 41 Selig at [36] 42 Selig at [36], referencing ABN AMRO at [1565], [1568]-[1570] (Jaccobson, Gilmour and Gordon JJ)
23
Contributory Negligence
106. Once a Court determines that in fact, as opposed to the manner in which a case
is pleaded, the cause of action is one involving a breach of duty of care, the
issue of contributory negligence of the plaintiff arises.
107. S5S of the CLA provides that in determining the extent of a reduction in
damages by reason of “contributory negligence”, a Court is entitled to
determine that the defendant be allowed a 100 per cent reduction in any
damages awarded against it, if the Court is of the view that it is just and
equitable to do so, and will result in the claim being defeated.
108. By S137B of the Competition and Consumer Act, 2010 where a claimant’s
loss and damage resulted partly as a result of the claimant’s failure to take
reasonable care and partly because of the conduct of the other person, the
amount of the loss and damage that the claimant may recover under S236(1)
of the Consumer Law is to be reduced to the extent to which the Court thinks
is just and equitable having regard to the claimant’s share in the responsibility
in the loss or damage.
109. Similar provisions are contained in the various Acts of the States and
Territories and in the Corporations Act, S1041H (1)(B) and the Australian
Securities Investment Commission Act S129GF (1)(B).
110. As to what is just and equitable, the High Court in Pennington v Norris43
held:
“what has to be done is to arrive at a ‘just and equitable’ apportionment as
between the plaintiff and the defendant of the ‘responsibility’ for the damage.
It seems clear that this must of necessity involve a comparison of culpability.
By culpability, we do not mean moral blameworthiness but the degree of
departure from the standard of care of the reasonable man.”
111. In Podrebersek v Australian Iron & Steel Pty Ltd,44
the High Court held “the
making of an apportionment as between a plaintiff and a defendant of their
respective shares in the responsibility for the damage involves a comparison
both of culpability, ie of the degree of departure from the standard of care of
the reasonable man man (Pennington v Norris) and of the relative importance
of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd;
43 [1956] HCA 26;(1956) 96 CLR 10 (6 June 1956) 44 59 ALR 529
24
Smith v McIntyre and Broadhurst v Millman, and cases there cited. It is the
whole conduct of each negligent party in relation to the circumstances of the
accident which must be subjected to comparative examination. The
significance of the various elements involved in such an examination will vary
from case to case; for example, the circumstances of some cases may be such
that a comparison of the relative importance of the acts of the parties in
causing the damage will be of little, if any, importance.”
112. The Federal Court in Valcorp Australia Pty Ltd v Angas Securities Limited,45
consisting of Jacobson, Siopis and Nicholas JJ, in applying S82(1B) of the
Trade Practices Act, 1974, the predecessor to S137(B) of the Competition and
Consumer Act, 2010, followed the common law contributory negligence
authorities in the High Court. However, the Court noted that some adjustment
may be required in the circumstances of the case because a party may engage
in misleading or deceptive conduct even in the absence of negligence.46
113. The Full Court in Valcorp accordingly considered the relative culpability of
the plaintiffs and the defendant, and the relative causative potency of the
impugned conduct of each of the parties. The Court held that each of the
parties should be found equally responsible for the loss suffered by the
plaintiffs.47
The plaintiffs’ award of damages was accordingly reduced by 50
per cent from the damages that would have been ordered had the Court made
no apportionment. The Full Court disagreed with trial judge, who had
apportioned liability between the plaintiffs and the defendant 25 to 75 per
cent.
114. The point which emerges is that although the plaintiff must only prove that the
defendant’s contravening conduct was a cause of its loss or damage, not the
cause so that other factors may have contributed, the plaintiff’s award of
damages can be reduced by reason of its own failure to take reasonable care to
avoid the loss or damage.
45 [2012] FCAFC 22 (8 March 2012) 46 Ibid at para [109] 47 [2012] FCAFC 22 at paras [114]-[117, [121]-[128]
25
Contracting out
115. In some jurisdictions, parties can contract out of the apportionment legislation
in the terms upon which they each deal with the other.
116. Currently, contracting out is expressly prohibited in Queensland and is
expressly permitted in Western Australia,48
New South Wales and Tasmania.
In the remaining jurisdictions, contracting out is neither expressly prohibited
nor permitted.
117. In Perpetual Trustee Company Ltd v CTC Group Pty Ltd (No2)49
the New
South Wales Court of Appeal concluded that:
“to contract out of the proportionate liability legislation all that is required is
for the parties to make ‘express provisions for their rights, obligations and
liabilities which differ form that provided by the proportionate liability
legislation. No particular wording was required.”50
118. In CTC Group Pty Ltd v Perpetual Trustee Company Ltd Co Ltd51
the High
Court dismissed a challenge to the Court of Appeal’s decision, which ruled
against allowing parties to contract out of proportionate liability.
“the High Court confirms the need for contracting parties to
(1) take care when negotiating new contracts which contain clauses which
affect the liabilities of the party to ensure they do or do not, depending
upon which side of the transaction the party is, contract out of the
proportionate liability regime;
(2) consider existing contractual arrangements, including those predating the
proportionate liability scheme to determine whether they have
inadvertently contracted out of the proportionate liability regime.”
48 Civil Liability Act, 2002 (WOS4A); Civil Liability Act, 2002 (NSW) S3A; and Civil Liability Act,
2002 (TAS) S3A 49 [2013] NSWCA 58 (20 March 2013) 50 Perpetual Trustee Company Ltd v CTC Group Pty Ltd (No 2) [2013] NSW CA 58[1]-[16] 51 [2013] HCA
26
Proposed Changes
119. The Law, Crime and Community Safety Council (LCCSC), formerly the
Standing Committee of the Attorney General (SCAG), conducted a review of
the national proportionate liability laws and proposed draft model legislation.
It aims to achieve unity in proportionate liability laws across Australia.
120. In September 2011, the former Standing Committee released an impact
statement on proportionate liability, identifying the legislative inconsistencies
in provisions between the States and Territories, and developed model
legislative provisions. In 2013, the LCCSC released a revised draft model of
legislation, although as of its following report in November 2015, the model
legislation has not been adopted into any jurisdiction’s proportionate liability
regime.
121. The proposed changes include:
121.1 Any contractual terms that allow one or more of the parties to contract
out of proportionate liability will be void, although any agreement of
one party to indemnify another is not affected. This alters the regime in
New South Wales, Tasmania and Western Australia, which, unlike
Queensland, have provisions that allow parties to contract out of their
proportionate liability obligations.
121.2 The Court may take into account the responsibility of concurrent
wrongdoers not party to the proceedings when apportioning liability.
This moves away from Victoria’s provision that non-parties are not to
be included in this determination under S24AI(3) of the Wrongs Act,
1958 (Vic). The responsibility of notified concurrent wrongdoers must
be considered, even those who have settled with the plaintiff.
121.3 The defendant must, within reasonable time, notify the plaintiff of
information concerning the identity and location of persons whom the
defendant has reasonable grounds to believe are concurrent
wrongdoers. Failure to comply results in, if the Court considers it just
and equitable, an order that the defendant is severally liable for any
award of damages, and/or an order against the defendant for payment
of costs thrown away due to the failure to comply.
27
Conclusion
122. The State legislation concerning apportionable claims is by and large
consistent.
123. However, at least until the amendments are made, in New South Wales,
Western Australia and Tasmania, parties are able to contract out of the
apportionment legislation.
124. There seems to be no power to contract out of the apportionment legislation
under the Commonwealth Acts.
125. The inconsistencies are regrettable, but steps have been taken to harmonise the
legislation.
126. There still remains comparatively limited circumstances in which the
apportionment legislation applies:
126.1 where a breach of duty is claimed under the Civil Liability Act, 2002
(NSW) and the similar Acts in the States or Territories for personal
injuries claims;
126.2 the misleading and deceptive conduct in trade and commerce in breach
of S18 of the Australian Consumer Law;
126.3 in claims made for misleading and deceptive conduct about a financial
product or a financial service within the meaning of the Corporations
Act and the ASIC Act, and not claims for professional or other
negligence.
127. Under this legislation, a claimant may have the claim reduced to the extent of
the claimant’s contribution to his or its loss.
GREG LAUGHTON SC
13 Selborne Chambers
174 Phillip Street
SYDNEY NSW 2000
T: 9233 8796 F: 9221 4196