In the space of a week, the Full Federal Court delivered two conflicting judgments on a key issue in proportionate liability regimes under Commonwealth legislation.
This decision comes at a time where, following the 2013 High Court decision in Mitchell Morgan Nominees Pty Ltd & Anor v Vella & Ors (see " High Court gives guidance on proportionate liability") and the release of the draft model legislation (see " Proportionate liability: model legislation released"), it was hoped that some of the uncertainty around proportionate liability would be resolved. However, as these cases demonstrate, there is a still a long way to go.
What is proportionate liability?
Proportionate liability was introduced to modify the common law rule of joint and several liability, so that defendants were only liable for the proportion of the damage that they had caused. The proportionate liability legislation was intended to prevent one wrongdoer being held responsible for the entire cost of the injured party and being unable to recover from the other wrongdoers.
As we have discussed in previous articles in Government Matters ( "Are you paying your fair share"; "Proportionate liability: the courts weigh in"; "High Court gives guidance on proportionate liability"; and "Proportionate liability: model legislation released"), the proportionate liability regime has been plagued with difficulty, with courts grappling with many of the key concepts in the various state and territory legislation (which are different). The uncertainty has highlighted the need for a uniform and certain regime.
Commonwealth proportionate liability regimes
Importantly, these decisions involved proportionate liability provisions contained in Commonwealth legislation. This meant that the state and territory based proportionate liability legislation and court decisions, where recent guidance has developed, did not apply.
The Full Federal Court disagrees with itself
The key question in both decisions was whether, in a claim with multiple causes of action but only one cause of action that had a legislative proportionate liability regime, the regime will apply to all the causes of action?
Wealthsure Pty Ltd v Selig
This 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.
On 30 May 2014, the majority of the Full Federal Court decided that all claims were covered by the proportionate liability regime if they resulted from the same loss or damage that was apportionable under the legislation. In effect, this involves focusing on the loss or damage claimed, as opposed to the characteristic of the cause of action.
Therefore, based on this decision, even if some claims are not apportionable if they are brought on their own, they become subject to proportionate liability because the loss or damage caused by those claims was the same as the loss or damage caused by contravention of the legislation imposing a proportionate liability regime.
ABN AMRO Bank NV v Bathurst Regional Council
However, a week later, the Full Federal Court handed down a decision expressly rejecting the reasoning of the majority in Wealthsure.
The 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 on a joint and several basis for the full loss.
What this means
With the members of the Full Federal Court disagreeing on this issue, it is likely that the composition of the Court will determine whether a claim involving a cause of action with a Commonwealth statutory apportionment regime will result in all causes of action arising out of the same facts becoming apportionable. However, given the uncertainty created by these two decisions, it is hoped that the matter will be resolved by the High Court in the near future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
