Australia: Proportionate liability: The High Court resolves the dispute

Yesterday, in Selig v Wealthsure [2015] HCA 18, the High Court resolved the conflict between two Full Federal Court decisions concerning the application of statutory proportionate liability regimes contained in the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 (ASIC Act).

Ordinarily, concurrent wrongdoers are each liable to a plaintiff for the entirety of the plaintiff's loss, regardless of their respective contributions to that loss. The rule, known as solidary liability, has been displaced in certain circumstances by the introduction of statutory proportionate liability regimes. In respect of claims that are defined as apportionable, the regimes operate to limit the liability of concurrent wrongdoers to their share of responsibility for the resulting loss or damage. Solidary liability remains for claims falling outside the regimes (non-apportionable claims), such as negligence, breach of contract, misleading takeover or fundraising documents or defective disclosure documents.

In Selig, the High Court was asked to consider the applicability of the proportionate liability regimes in the Corporations and ASIC Acts where a plaintiff pleads multiple causes of action giving rise to the same loss, and one cause falls squarely within the scope of the regime while the others do not.

The Court resolved that issue by determining that causes of action outside the scope of the proportionate liability regimes are not deemed to be apportionable simply because they give rise to the same loss or damage as an apportionable claim. It means that plaintiffs with alternative causes of action can avoid the proportionate liability regime altogether by pleading only non-apportionable claims.


Proportionate liability for misleading and deceptive conduct was introduced by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9 Act). The CLERP 9 Act implemented changes across the Corporations Act, the ASIC Act and the Trade Practices Act 1974 (TPA) by introducing a proportionate liability regime for claims for economic loss or property damage arising from misleading or deceptive conduct. The fundamental feature of this model is that it allows a court to have regard to the comparative responsibility of any concurrent wrongdoer, whether or not it is a party to the proceeding. 1

What it means to have 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 another which is not. In those circumstances, the question is whether the other cause(s) of action become subject to the same proportionate liability regime because they give rise to the same damage or loss.


The High Court had reason to consider the question after the Federal Court of Australia (FCA) issued two conflicting Full Court decisions in 2014.

In Wealthsure Pty Ltd v Selig [2014] FCAFC 64, Mansfield and Besanko JJ (White J dissenting) held that, where there are two or more causes of action, one of which is apportionable and others which are not, they are to be treated as a single apportionable claim provided that they give rise to the same loss and damage. Their Honours said it is the loss and damage that is critical, not the cause of action.

A differently constituted Full Court came to a contrary conclusion in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65. In that case, the plurality supported the conclusions reached by White J in Wealthsure to the effect that the term "single apportionable claim" refers only to causes of action that are themselves apportionable. It does not operate to draw into the proportionate liability regime claims which are not expressly identified in the legislation as being apportionable.


In Selig, the High Court overturned the orders of the Full Court and reinstated the first instance orders made by Lander J that each of the first, second, fifth and sixth defendants were liable for the whole of the damage suffered by the appellants. The High Court arrived at that conclusion by construing the provisions making up the proportionate liability regime within the Corporations Act (and, by analogue, the ASIC Act).

The debate before the Court focussed on the definition of "apportionable claim" contained within section 1041L of the Corporations Act. Sub-section 1041L(1) defines an apportionable claim as one made under section 1041I for economic loss or property damage caused by conduct that was in contravention of section 1041H. Sub-section 1041L(4) also emphasises that apportionable claims are limited to those specified in s 1041L(1).

However, sub-section 1041L(2) provides that "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)". The respondents' principal contention was that the words "cause of action (whether or not of the same or different kind)" had the effect of augmenting the definition of "apportionable claim" in sub-section (1) so as to draw in other causes of action not otherwise caught by s 1041L(1), where an apportionable claim was already in play.

In the Court's view, it would be inconsistent with subsections 1041L(1) and (4) to interpret the word "claim" in subsection 1041L(2) as extending or completing the meaning of apportionable claim. The term "single apportionable claim" serves merely to explain that a plaintiff can advance various causes of action based on a contravention of section 1041H but, so long as they concern the same loss or damage, those causes of action will constitute only one claim for the purpose of apportioning responsibility between wrongdoers.

Consistently with that view, the legislation elsewhere states that, where proceedings involve both apportionable and non-apportionable claims, the former is to be dealt with under the proportionate liability regime and the latter is to be determined according to the legal rules that apply to it (and not the proportionate liability regime).2

That conclusion was also supported by the genesis of the proportionate liability regimes. Each of the Corporations, ASIC and Trade Practices Acts were amended to establish proportionate liability in respect of specific misleading and deceptive conduct claims. There is nothing to suggest that the Commonwealth Parliament intended to alter any civil liability other than those provisions it had expressly amended.

The result is that a claim arising from a breach of another statutory norm or common law rule is not apportionable notwithstanding that it gives rise to the same loss or damage as an apportionable claim.


While the Court's judgment related to provisions of the Corporations and ASIC Acts, the same interpretation is likely to available in respect of the equivalent provisions in the Trade Practices Act 1974 (TPA) and its successor, the Competition and Consumer Act 2010.3

On one view, the decision undermines the purpose of proportionate liability, being to alleviate "deep pocket syndrome", and to leave defendants liable solely for that part of a plaintiff's loss for which they were responsible. In respect of the Corporations and ASIC Acts, where the conduct carved out of the regime involves a higher degree of moral culpability, it is understandable that the legislature may have intended that a wrongdoer should not have the benefit of the regime to limit his or her liability.4 However, the idea holds less weight in the context of the TPA, where it is precisely the same contravention that gives rise to both an apportionable and a non-apportionable claim.5

Whatever the intention, the Court's decision means that those who knowingly or recklessly mislead or engage in dishonest conduct in relation to financial services or products can expect to be wholly liable for any resulting loss or damage.6

The practical effect of the decision is that a plaintiff with alternative rights of action for the same loss or damage can choose how to frame its case. Plaintiffs have good reason to avoid pleading an apportionable misleading and deceptive conduct claim under one of the relevant Acts alone because it means:

  • a plaintiff must join all concurrent wrongdoers in order to have a chance of recovering its full loss or damage;
  • the risk lies with the plaintiff that a wrongdoer is unable to pay its share of damages, for example due to insolvency or limited insurance; and
  • a plaintiff may see its recovery of damages reduced by reference to its contributory negligence.

Conversely, a defendant is best placed if it can plead a proportionate liability defence, where it can reduce its liability to the plaintiff regardless of the position of its concurrent wrongdoers. However, the Court's narrow interpretation of an apportionable claim means defendants will need to find other means of sharing their potential liability. This means looking to recover by way of contribution (and grappling with the difficult choice of law issues that often prevail in determining the appropriate contribution regime, particularly given the variances between the Wrongs Act 1958 (Vic) and all other jurisdictions) or cross claim, and deciding when such claims ought be brought.


1 House of Representatives, Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003, Explanatory Memorandum at [5.352].

2 Corporations Act, s 1041N(2); ASIC Act s 12GR(2).

3 Trade Practices Act, s 87CB; Competition and Consumer Act, s 87CB.

4 French CJ, Kiefel, Bell and Keane JJ at [36]; ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65 at [1565], [1568]-[1570].

5 Rivercity Motorway Finance Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) v AECOM Australia Pty Ltd (No 2) [2014] FCA 713 at [40] (Nicholas J); Trade Practices Act, s 52; Australian Consumer Law, s 18.

6 Corporations Act, ss 1041E-1041I.

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.

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