The High Court has decided that the proportionate liability
regime in the Corporations Act is limited to a claim based upon
misleading or deceptive conduct in relation to a financial product
or services, and not to alternative causes of action arising out of
the same set of circumstances (Selig v Wealthsure  HCA
This means that claimants in such situations can avoid
the operation of the proportionate liability regime by
proving, or pleading only, causes of action other than for
apportionable claims, even if the circumstances and amount of loss
for those alternative claims is the same.
The proportionate liability regime
The effect of the statutory proportionate liability regime is
that if the claim is an apportionable claim involving concurrent
wrongdoers, a defendant (or concurrent wrongdoer) is only liable to
the extent to which they were responsible for the loss incurred by
The regime was introduced to address the "deep pocket"
syndrome and in an attempt to reduce the cost of professional
indemnity insurance premiums by shifting the risk of insolvent or
under-insured defendants to the plaintiff and providing more
certainty for insurers.
Selig v Wealthsure  HCA 18: the proportionate
liability scheme didn't apply to all claims
The Seligs invested in a financial product, Neovest, on the
advice of an authorised representative of Wealthsure. The product
was a Ponzi scheme.
The Seligs sought to recover the loss of their investment and
consequential loss against the advisers and the insolvent directors
of Neovest. The claim was made on various grounds including the
Corporations Act prohibition against misleading or deceptive
conduct in relation to a financial product or services (section
1041H), other breaches of the Corporations Act, breach of contract
and negligence. The issue before the High Court was the following
... there is a single apportionable claim [meaning a
claim for loss or damage caused by conduct that was done in
contravention of section 1041H] 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),
and whether this meant that the other causes of action (which
were not apportionable claims) were subject to the proportionate
The advisers had been assessed to be 60% responsible and the
insolvent directors to be 40% responsible under the proportionate
liability regime, however the High Court said that regime applied
only to the section 1041H claim and not the other causes of action
against the advisers (see below), with the effect that the Seligs
could recover 100% of their loss from the advisers.
Practical implications: more claimants might avoid the
proportionate liability regime
Claimants with multiple causes of action including apportionable
claims for misleading and deceptive conduct may avoid the
operation of the proportionate liability regime by also pleading
non-apportionable claims. For example, 1041E of the
Corporations Act provides a potential alternative cause of action
for false and misleading statements likely to induce persons to
acquire financial products. This cause of action was pleaded and
made out by the Seligs.
In addition to section 1041H of the Corporations Act, there are
analogue provisions to be found in section 12DA of the Australian
Securities and Investments Commission Act 2001 (Cth) and section 18
of the Australian Consumer Law. The same approach could be
used to avoid the effect of the proportionate liability regime
applying to those causes of action.
Persons who find themselves named as defendants to proceedings
will need to carefully consider whether they are exposed to
100% of liability, if the claim includes apportionable
claims and other claims which are not subject to the proportionate
The decision also has implications for contractual risk
allocation and will need to be carefully considered in
that context and in light of whether a party is more likely to be a
plaintiff or a defendant.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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