Australia: Clarity on apportionable claims - Selig v Wealthsure Pty Ltd (2015) 320 ALR 47
Construction Law Update - October 2015

KEYWORDS: PROPORTIONATE LIABILITY KEY TAKEAWAYS

This decision clarifies the scope of "apportionable claims" under the Corporations Act (the Act). Where a plaintiff claims for the same loss or damage on different grounds, under s 1041h of the Act, the loss will be apportioned as though there is a single claim. This decision only concerns Division 2a of part 7.10 and will not necessarily apply to claims based on other sections of the Act.

The facts

The appellants invested in Neovest Limited (Neovest) on the advice of David Bertram (the second respondent), an authorised representative of Wealthsure Pty Ltd (the first respondent). Norton Capital also participated in the promotion of the investment. The Court described the venture as a "Ponzi scheme".¹ Neovest became insolvent. The appellants lost their investment and suffered consequential losses.

At first instance the appellants claimed that the first and second respondents contravened a number of statutory provisions, including section 1041H of the Corporations Act, which prohibits misleading or deceptive conduct.² Lander J found the first, second, fifth and sixth respondents each liable to the appellants for the whole loss suffered. Further, Lander J held that Division 2A of the Act only applied where section 1041H had been contravened and not where there was a successful statutory or common law claim for that loss.³

The first and second respondents succeeded on these proportionate liability questions on appeal to the Full Court of the Federal Court.

Issues on appeal

The primary issue on appeal to the High Court was whether Division 2A applied to all of the appellants' successful causes of action, so that the loss suffered by the appellants should have been apportioned among the respondents.

The decision

Application of Division 2A

The High Court held that the meaning of "apportionable claim" in section 1041L(1) was critical to determining the ambit of Division 2A. Their Honours held that while the loss or damage that the appellants alleged they had incurred was the same, the issue was whether Division 2A applied so that that loss had to be apportioned. The first hurdle to establishing an apportionable claim under this provision is that it be for damages claimed under section 1041I. Notably, their Honours pointed out that these damages must be claimed for a contravention of s 1041H.⁴

The High Court was critical of the Full Court's decision to focus on section 1041L(2), to the detriment of section 1041L(1), in determining the construction of the term "apportionable claim".⁵ The Full Court had identified two aspects of section 1041L(2) as important to an understanding of what constitutes an "apportionable claim": (i) the requirement that the loss or damage the subject of the causes of action be the same; and (ii) the acknowledgement that there may be more than one cause of action and that they may be of different kinds. As a consequence, the Full Court was able to view each cause of action pleaded by the appellants as being an "apportionable claim".

The High Court disagreed with this approach. Instead, it held, applying well-settled rules of construction, that the same meaning should be given to the word "claim" where it appears in sections 1041L(1) and 1041L(2).⁶ Rather, the purpose of section 1041L(2) is to explain that, regardless of the number of ways in which a plaintiff seeks to substantiate a claim for damages based on a contravention of section 1041H, so long as the loss or damage claimed is the same, apportionment is to be made on the basis that there is a single claim.⁷

In summary an "apportionable claim" for the purposes of Division 2A is a claim based on a contravention of section 1041H only and does not extend to claims based upon conduct of a different kind.⁸

http://www.austlii.edu.au/au/cases/cth/ HCA/2015/18.html

Footnotes

¹ At [1] (French CJ, Kiefel, Bell and Keane JJ)
² Wealthsure Pty Ltd v Selig (2013) 94 ACSR 308
³ Wealthsure Pty Ltd v Selig (2013) 94 ACSR 308 at [1146]–[1147] (Lander J)
⁴ At [24] (French CJ, Kiefel, Bell and Keane JJ)
⁵ At [27]–[29] (French CJ, Kiefel, Bell and Keane JJ)
⁶ At [29] (French CJ, Kiefel, Bell and Keane JJ)
⁷ At [31] (French CJ, Kiefel, Bell and Keane JJ)
⁸ At [37] (French CJ, Kiefel, Bell and Keane JJ)

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.

Most awarded firm and Australian deal of the year Australasian Legal Business Awards	Employer of Choice for Women Equal Opportunity for Women in the Workplace (EOWA)