Wealthsure Pty Ltd v Selig
[2014] FCAFC 64
•30 May 2014
FEDERAL COURT OF AUSTRALIA
Wealthsure Pty Ltd v Selig [2014] FCAFC 64
Citation: Wealthsure Pty Ltd v Selig [2014] FCAFC 64 Appeal from: Selig v Wealthsure Pty Ltd [2013] FCA 348 Parties: WEALTHSURE PTY LTD (ABN 93097405108) and DAVID BERTRAM v RONALD SELIG AND JANNA SELIG, RICHARD WILLIAM SPENCER, SILVANA PEROVICH, MARK RICHARD NORTON, PETER MAURICE TOWNLEY, NEOVEST LIMITED (IN LIQUIDATION) ACN 104 915 906, NORTON CAPITAL PTY LIMITED (IN LIQUIDATION) ACN 086 207 169, DANIEL GEOFFREY LILLEY, DAMIEN BERNARD GREER, ROBERT NOEL GALLAGHER, STEPHEN JAMES DICKENS and MICHAEL JOSEPH CROUCH File number: SAD 97 of 2013 Judges: MANSFIELD, BESANKO AND WHITE JJ Date of judgment: 30 May 2014 Catchwords: CORPORATIONS – contraventions of ss 945A, 945B, 728, 769C, 1041E, 1041F and 1041H of the Corporations Act 2001 (Cth), ss 12BB, 12DA, 12DB and 12ED of the Australian Securities and Investments Commission Act 2001 (Cth) and contractual and common law duty of care in the provision of advice and disclosure documents in relation to investment – damages for loss of investment and consequential losses – whether findings inconsistent with pleaded case – whether defendants liable for consequential losses – consideration of principles of causation of loss in relation to statutory contraventions
DAMAGES – whether damages correctly assessed on a “no transaction” basis – whether damages correctly assessed on the basis investment wholly lost – whether compound interest correctly calculated – application of contributory negligence and proportionate liability provisions in Corporations Act and ASIC Act – whether “a single apportionable claim” in s 1041L(2) of the Corporations Act and s 12GP(2) of the ASIC Act comprises all claims for the same loss or damage or only those which are themselves apportionable claims under ss 1041L(1) and 12GP(1) – whether allocation of responsibility of loss between parties inappropriate
Legislation: Australian Consumer Law (Cth) s 236
Australian Securities and Investments Commission Act 2001 (Cth) ss 12BAB, 12BB, 12DA, 12DB, 12ED, 12GF, 12GP, 12GP-12GW
Bankruptcy Act 1966 (Cth) ss 58, 60
Corporations Act 2001 (Cth) ss 278, 283F, 601MA, 601XAA, 670A, 670B, 728, 729, 766A, 766B, 766C, 763A, 769C, 916A, 991A, 945A, 945B, 953A, 953B, 1022A, 1022B, 1041E, 1041F, 1041G, 1041H, 1041I, 1041L-1041S, 1325, 1466
Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth)
Civil Liability Act 2002 (NSW) s 34
Civil Liability Act 2003 (Qld) Chapter 2, Part 2
Federal Court of Australia Act 1976 (Cth) ss 24, 51A
Federal Court Rules 2011 (Cth) r 36.73
Law Reform Act 1995 (Qld)
Law Reform (Contributory Negligence) Amendment Act 2001 (Qld)
Partnership Act 1891 (Qld) s 13
Superannuation Legislation Amendment (Further MySuper and Transparency Measures) Act 2012 (Cth) s 3, Schedule 3
Trade Practices Act 1974 (Cth) ss 52, 82, 87CB-87CIWrongs Act 1958 (Vic) s 24AI
Cases cited: Ah Toy v Registrar of Companies (1985) 10 FCR 280
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; (2009) 239 CLR 27Allianz Australia Insurance Limited v GSF Australia Pty Limited [2005] HCA 26; (2005) 221 CLR 568
Astley v Austrust [1999] HCA 6; (1999) 197 CLR 1
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Barisic v Devenport [1978] 2 NSWLR 111
Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200
Bennett v Elysium Noosa Pty Ltd [2012] FCA 211; (2012) 202 FCR 72
BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH (No 2) [2011] VSC 659
BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656British Fame (Owners) v MacGregor (Owners) [1943] AC 197
Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 293 ALR 257
Copping v ANZ McCaughan Ltd (1997) 67 SASR 525Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Hall v A & A Sheiban Pty Ltd (1989) 20 FCR 217
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216House v The King [1936] HCA 40; (1936) 55 CLR 499
Hungerfords v Walker (1989) 171 CLR 125
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109
Landsal Pty Ltd v REI Building Society (1993) 113 ALR 643
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494
Martin v Fresho Foods Pty Ltd [2009] FCAFC 165
Medlin v The State Government Insurance Commission (1995) 182 CLR 1
Miletich v Murchie [2012] FCA 1013; (2012) 297 ALR 566Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388
Nominal Defendant v Gardikiotis (1996) 186 CLR 49
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191Pennington v Norris (1956) 96 CLR 10
Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALR 529Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) 82 NSWLR 762Rod Investments (Vic) Pty Ltd v Abeyratne (No 2) [2009] VSC 278
TheBell Group Ltd (in liquidation) v Westpac Banking Corporation (No 9) [2008] WASC 239
Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581Travel Compensation Fund v Tamburee [2005] HCA 69; (2005) 224 CLR 627
Valcorp Australia Pty Ltd v Angas Securities Limited [2012] FCAFC 22Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Wingecarribee Shire Council v Lehman Brothers Australia Ltd (ACN 066 797 760) (In Liq) [2012] FCA 1028; (2012) 301 ALR 1
Woods v De Gabriele [2007] VSC 177Date of hearing: 3 and 4 October 2013 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 382 Counsel for the Appellants/Third and Fourth Cross-Respondents: Mr R Whitington QC with Mr T Cox SC Solicitor for the Appellants/Third and Fourth Cross-Respondents: Cosoff Cudmore Knox Counsel for the First Respondent/First and Second Cross-Respondents: Mr P Heywood-Smith QC with Mr D Riggall Solicitor for the First Respondent/First and Second Cross-Respondents: Radbone & Associates Counsel for the Fifth Respondent/Cross-Appellant: Mr Q Rozario Solicitor for the Fifth Respondent/Cross-Appellant: Delta Law
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 97 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: WEALTHSURE PTY LTD (ABN 93097405108)
First Appellant/Third Cross-RespondentDAVID BERTRAM
Second Appellant/Fourth Cross-Respondent
AND: RONALD SELIG AND JANNA SELIG
First Respondent/First and Second Cross-RespondentsRICHARD WILLIAM SPENCER
Second RespondentSILVANA PEROVICH
Third RespondentMARK RICHARD NORTON
Fourth Respondent/Fifth Cross-RespondentPETER MAURICE TOWNLEY
Fifth Respondent/Cross-AppellantNEOVEST LIMITED (IN LIQUIDATION)
ACN 104 915 906
Sixth Respondent/Sixth Cross-RespondentNORTON CAPITAL PTY LIMITED (IN LIQUIDATION) ACN 086 207 169
Seventh Respondent/Seventh Cross-RespondentDANIEL GEOFFREY LILLEY
Eighth Respondent/Eighth Cross-RespondentDAMIEN BERNARD GREER
Ninth Respondent/Ninth Cross-RespondentROBERT NOEL GALLAGHER
Tenth Respondent/Tenth Cross-RespondentSTEPHEN JAMES DICKENS
Eleventh Respondent/Eleventh Cross-RespondentMICHAEL JOSEPH CROUCH
Twelfth Respondent/Twelfth Cross-Respondent
JUDGES:
MANSFIELD, BESANKO AND WHITE JJ
DATE OF ORDER:
30 MAY 2014
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The appeal by Wealthsure Pty Ltd and Mr David Bertram be allowed.
2.The cross-appeal by Mr Peter Maurice Townley be allowed.
3.The second order made by the primary judge on 18 April 2013 be set aside and in lieu of that order there be orders as follows:
(i)Judgment for the plaintiffs against the first and second defendants in the sum of $875,506.80;
(ii)Judgment for the plaintiffs against the fifth defendant in the sum of $364,794.50;
(iii)Judgment for the plaintiffs against the sixth defendant in the sum of $218,876.70.
4.The parties be heard as to any other orders and costs.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 97 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: WEALTHSURE PTY LTD (ABN 93097405108)
First Appellant/Third Cross-RespondentDAVID BERTRAM
Second Appellant/Fourth Cross-RespondentAND: RONALD SELIG AND JANNA SELIG
First Respondent/First and Second Cross-RespondentsRICHARD WILLIAM SPENCER
Second RespondentSILVANA PEROVICH
Third RespondentMARK RICHARD NORTON
Fourth Respondent/Fifth Cross-RespondentPETER MAURICE TOWNLEY
Fifth Respondent/Cross-AppellantNEOVEST LIMITED (IN LIQUIDATION)
ACN 104 915 906
Sixth Respondent/Sixth Cross-RespondentNORTON CAPITAL PTY LIMITED (IN LIQUIDATION) ACN 086 207 169
Seventh Respondent/Seventh Cross-RespondentDANIEL GEOFFREY LILLEY
Eighth Respondent/Eighth Cross-RespondentDAMIEN BERNARD GREER
Ninth Respondent/Ninth Cross-RespondentROBERT NOEL GALLAGHER
Tenth Respondent/Tenth Cross-RespondentSTEPHEN JAMES DICKENS
Eleventh Respondent/Eleventh Cross-RespondentMICHAEL JOSEPH CROUCH
Twelfth Respondent/Twelfth Cross-Respondent
JUDGES:
MANSFIELD, BESANKO AND WHITE JJ
DATE:
30 MAY 2014
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
MANSFIELD J:
I have had the benefit of considering the separate reasons for judgment of Besanko J and White J. I respectfully adopt, and agree with, the reasons for judgment of White J save for his Honour’s conclusion on what he has identified as Issue No 8: ‘Were the Seligs’ claims “apportionable claims?”’ I note that his Honour’s reasons on what he has called Issue 9: ‘The allocation of responsibility’ record that he agrees with Besanko J on the matters considered under that issue although, given the decision he had reached on Issue 8, the matters raised in Issue 9 did not strictly speaking need to be addressed in his reasons. I also agree with the reasons for judgment of Besanko J on Issue 9, appearing in his Honour’s reasons under the heading ‘The Assessment of Contributory Negligence and the Apportionment between the Respondents’.
Consequently, subject to expressing my own views as to whether the Seligs’ claims amounted to an apportionable claim, I agree that the appeal and the cross-appeal of Mr Townley should be allowed only by substituting for the judgment sum against them the sum of $1,716,680 as proposed by White J.
There remain the issues of whether the Seligs’ entitlement to damages should be reduced by 15% for their share in responsibility for the loss or damage they have suffered, pursuant to s 1041I of the Corporations Act 2001 (Cth) (Corporations Act), and whether the liability of the appellants (and Mr Norton) should be apportioned between them because the Seligs’ claim is an apportionable claim under Div 2A of Pt 7.10 of the Corporations Act, so as to reflect the respective percentages of responsibility as found by the primary judge and as sustained on this appeal.
Each of those issues depends upon the construction of the relevant provisions of the Corporations Act.
The principles of construction are not contentious and are referred to in the judgments of Besanko J and White J. As their respective reasons and those of the primary judge indicate, the issue of construction is not a straightforward one. It is a matter upon which different minds may readily differ. That is also demonstrated by the review of the relevant authorities made by each of Besanko J and White J in their respective reasons for judgment.
Ultimately, it is necessary to focus on the words of the relevant statutory provisions.
Section 1041L (1) provides that Div 2A applies to a claim, called an apportionable claim, if the claim is a claim for damages made under s 1041I for economic loss or damage to property caused by conduct that was done in a contravention of s 1041H. Section 1041L(4) confines apportionable claims to those specified in s 1041L(1), that is to claims for that type of loss caused by conduct in a contravention of s 1041H.
Section 1041N then provides that in any proceedings involving an apportionable claim, the liability of a defendant who is a concurrent wrongdoer in relation to that claim is to be apportioned. It is only the apportionable claim that is to be apportioned, and not a claim that is not an apportionable claim: s 1041N(2). In the proceedings, in apportioning responsibility between defendants for the apportionable claim, the Court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law: s 1041N(3).
In my view, ss 1041L(2) and (3) are significant. They provide:
(2)For the purposes of this Division, there is a single apportionable claim in the 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.
In my view, those provisions tend to indicate that the appropriate focus is upon whether the claim or claims made in a particular matter, in this case the claims of the Seligs, are in respect of the same loss or damage. The focus is upon the nature of the loss or damage for which relief is sought, rather than upon the nature of the cause of action or causes of action which give rise to the entitlement to that loss or damage. That is fortified by the parenthesised words in s 1041L(2) which contemplates that the causes of action giving rise to the same loss or damage need not be of the same kind. Section 1041L(3) then defines a ‘concurrent wrongdoer’ in relation to a claim as one or more of the persons whose acts or omissions caused the loss or damage which is the subject of the apportionable claim. The combination of those two subsections, in my view, indicates a legislative intention that an apportionable claim is one where a claim for damages for economic loss caused by a contravention of s 1041H succeeds. Provided that there is a separate cause or other causes of action against the person or persons who have contravened s 1041H, if that other or those other causes of action have caused the same damage, the claim maintains its character as an apportionable claim. Provided there is another cause or other causes of action against that person or other persons, that person or other persons will be a concurrent wrongdoer if that person’s acts or omissions caused the same loss or damage. Indeed, for the purposes of this appeal, it is not necessary to go quite so far. That is because each of Mr Norton and Mr Townley (as well as Wealthsure and Mr Bertram) were found to have contravened s 1041H as well as other provisions, and by their respective contraventions of s 1041H to have caused or contributed to causing the same loss and damage.
Consequently, in my view, even though the primary judge found (and it has been maintained on appeal) that both Wealthsure and Mr Bertram contravened s 728, and that the contraventions of ss 945A and 945B amounted to conduct in relation to a disclosure document or statement within the meaning of s 953A, their conduct amounting to those contraventions does not preclude the operation of s 1041N because their claim involved an apportionable claim because it included a claim under s 1041H(1) in respect of the same loss or damage. The primary judge made the point in his reasons that the Seligs claim for loss and damage was the same in relation to the various causes of action against both Wealthsure and Mr Bertram, and indeed against the other groups of defendants.
I do not regard s 1041H(3) as indicating a contrary conclusion. Clearly, as a legislative device, ss 1041H(3) is intended to exclude from conduct which contravenes s 1041H(1) conduct which falls within s 670A, ss 728, s 953A, and s 1022A. Precisely the same conduct should not amount to a contravention of different legislative proscriptions of conduct in relation to the particular activities to which they refer. The definition of an ‘apportionable claim’ in s 1041L does not however require that contraventions of those provisions, which arise out of related conduct and which together with a contravention of s 1041H has caused the same loss and damage not to be an apportionable claim.
The same may be said in respect of liability which is established for negligence or breach of conduct arising out of the same general conduct, elements of which may be common with the liability under s 1041H(1), and which produce the same loss and damage. That is the situation here.
I consider that that construction of ss 1041L and 1041N reflects the policy which underlay the CorporateLaw Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) (the CLERP Act) which introduced the proportionate liability provisions into the Corporations Act, and contemporaneously into the then Trade Practices Act 1974 (Cth) and into the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). In the explanatory memorandum to the CLERP Act at 4.110, it was said that the objectives of the proportionate liability provisions were to prevent the “deep-pocket syndrome” whereby professional service providers become the targets of negligent actions as much because they are insured and have the capacity to pay large damages awards as because they are culpable whereas the primary wrongdoers were often the enterprises to whom professional services were rendered. As a corollary, the proportionate liability provisions were to enable insurers to more accurately assess and price risk, whereas the joint and several liability then available made it very difficult for insurers to measure the potential liability of professional service providers or to provide to them premiums at levels which were both suitable and appropriate and realistically priced. The device chosen was to limit the liability of professional defendants, and all defendants, for the loss suffered by a successful plaintiff, to the extent to which each defendant was responsible for that loss.
To limit the application of Div 2A in the way in which the decision of the primary judge did, by adopting the alternative construction which his Honour adopted, is largely to dissipate or frustrate that legislative purpose. Provided the focus is maintained upon the contravention of s 1041H being the cause or causes of the same loss and damage as the related conduct, the claim is an apportionable claim because the conduct giving rise to that loss or damage was conduct in contravention of s 1041H(1). Such a claim would be an apportionable claim and as between the various defendants liable for that loss or damage, in my view the legislative policy in practical terms requires the construction which I have adopted.
In the present circumstances, the findings that each group of defendants contravened s 1041H, and that each group of defendants’ conduct contributed to the same loss and damage suffered by the Seligs, is sufficient to determine that the claim or claims against them each was an apportionable claim notwithstanding that the causes of action giving rise to that loss and damage extended beyond the contraventions of s 1041H(1). My conclusion therefore accords with the conclusion of Besanko J in this matter, and reflects the approach adopted by Jagot J in Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 at [3485].
For those reasons, in my view the appropriate orders on this appeal are that the appeal should be allowed, the loss and damage suffered by the Seligs altered to the figure determined by White J of $1,716,680, and that that amount should be reduced by 15% for their contributory negligence, to the figure of $1,459,178.
On the basis of the apportionment proposed by the primary judge (if he were to have considered that the claim was an apportionable one), there should then be judgment against Wealthsure and Mr Bertram for 60% of that amount, namely $875,506.80, against Mr Norton for 25% of that amount, namely $364,794.50, and against Mr Townley for 15% of that amount, namely $218,876.70.
I would enter judgment accordingly. I would give leave to the parties to make such further written submissions as they may be advised within 21 days on any additional interest which should be payable upon those amounts, and to make submissions as to costs.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate:
Dated: 30 May 2014
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 97 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: WEALTHSURE PTY LTD (ABN 93097405108)
First Appellant/Third Cross-RespondentDAVID BERTRAM
Second Appellant/Fourth Cross-RespondentAND: RONALD SELIG AND JANNA SELIG
First Respondent/First and Second Cross-RespondentsRICHARD WILLIAM SPENCER
Second RespondentSILVANA PEROVICH
Third RespondentMARK RICHARD NORTON
Fourth Respondent/Fifth Cross-RespondentPETER MAURICE TOWNLEY
Fifth Respondent/Cross-AppellantNEOVEST LIMITED (IN LIQUIDATION)
ACN 104 915 906
Sixth Respondent/Sixth Cross-RespondentNORTON CAPITAL PTY LIMITED (IN LIQUIDATION) ACN 086 207 169
Seventh Respondent/Seventh Cross-RespondentDANIEL GEOFFREY LILLEY
Eighth Respondent/Eighth Cross-RespondentDAMIEN BERNARD GREER
Ninth Respondent/Ninth Cross-RespondentROBERT NOEL GALLAGHER
Tenth Respondent/Tenth Cross-RespondentSTEPHEN JAMES DICKENS
Eleventh Respondent/Eleventh Cross-RespondentMICHAEL JOSEPH CROUCH
Twelfth Respondent/Twelfth Cross-Respondent
JUDGES:
MANSFIELD, BESANKO AND WHITE JJ
DATE:
30 MAY 2014
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
BESANKO J:
These reasons deal with the cross‑appellant, Mr Townley’s, liability for losses other than the loss on the investment in Neovest Limited (in liquidation) (“Neovest”) and compound interest (“other losses”), and the issues of contributory negligence and proportionate liability raised by the appellants. My conclusions with respect to the second of these matters mean that the appeal and cross-appeal must both be allowed. On all other issues raised by the appeal and cross-appeal, I agree with the reasons for judgment of White J, which I have had the considerable advantage of reading. The facts are set out in his Honour’s reasons.
I will refer to the appellants to the appeal as Wealthsure and Mr Bertram, and the respondents to the appeal as Mr and Mrs Selig. I will refer to Mr Spencer, Ms Perovich and Mr Townley, being directors of Neovest, as the directors, except where it is necessary to refer to them individually. Although Mr Norton was also a director of Neovest, it is convenient to refer to him when referring to Norton Capital Pty Ltd (in liquidation) (“Norton Capital”). Mr Norton was a director of Norton Capital. On occasions, it will be necessary to refer to the defendants at trial as a group. This is a reference to the defendants who were held liable to Mr and Mrs Selig.
MR TOWNLEY’S LIABILITY FOR OTHER LOSSES
The other losses comprised losses associated with the purchase of the Wynnum units, loan establishment costs, borrowing costs and refinancing costs.
There is a good deal of force in Mr Townley’s submission that he was not liable for the other losses. In other words, if he was liable at all to Mr and Mrs Selig, he was only liable for the loss of the investment in Neovest and compound interest. The primary judge found that Mr and Mrs Selig were paying compound interest to their financiers. Mr Townley was a director of Neovest, and the primary judge held him liable for a contravention of s 728(1) of the Corporations Act 2001 (Cth) (“the Corporations Act”) by reason of misleading and deceptive statements in two prospectuses, a contravention of s 1041E dealing with false and misleading statements in connection with the acquisition of financial products, and a contravention of s 1041H dealing with misleading or deceptive conduct in relation to a financial product or a financial service. Mr Townley was also held liable for a contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”), dealing with misleading and deceptive conduct in relation to financial services.
In factual terms, the principal basis upon which Mr Townley was held liable (together with the other directors) was a failure to identify the financial position of the Neolido Group in the two prospectuses.
It might be said that it is one thing to hold a director of a company which has issued a misleading prospectus liable for the loss of the investment and associated costs, such as borrowing costs, it is another to hold a director liable for all the losses resulting from an investor’s particular financial arrangements. Many investors may respond to a prospectus and each is likely to have their own peculiar arrangements. Mr Townley’s argument is even stronger in the case of some of the losses in this case. For example, in relation to the Orio refinancing costs of $97,564.37, the primary judge, in allowing such costs, relied on evidence of assurances about the soundness of the investment in Neovest given by Mr Bertram well after the investment was made.
Despite the force of these matters, and not without some hesitation, I have decided that Mr Townley’s challenge to the award against him of other losses should be rejected. Two matters of context are relevant, although not decisive. First, it was not suggested by Mr Townley that some of the other losses should be treated differently from others. Secondly, there were no detailed submissions about the effect of the important authorities referred to in the next paragraph.
Mr Townley was liable for loss or damage “because” of an act (s 729 of the Corporations Act) or “by” conduct (s 1041I of the Corporations Act and s 12GF of the ASIC Act). Legislative provisions giving a right to bring an action for damages in similar terms have given rise to issues as to the extent to which the common law test of causation should be applied, and the extent to which tortious principles relating to, for example, remoteness of damage and mitigation of loss should be applied (see Hall and Others v A & A Sheiban Pty Ltd and Others (1989) 20 FCR 217, at 239 per Lockhart J, and at 281 per French J (as his Honour then was); Henville and Another v Walker and Another (2001) 206 CLR 459; [2001] HCA 52, at 482, [66] per Gaudron J, at 493, [107] per McHugh J, and at 510, [166] per Hayne J; Murphy and Another v Overton Investments Pty Limited (2004) 216 CLR 388; [2004] HCA 3, at 407, [44]; I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109; [2002] HCA 41, at 119, [26] per Gleeson CJ; Allianz Australia Insurance Limited v GSF Australia Pty Limited and Another (2005) 221 CLR 568; [2005] HCA 26, at 596‑598, [96]‑[100] per Gummow, Hayne and Heydon JJ; and Travel Compensation Fund v Tamburee and Others (2005) 224 CLR 627; [2005] HCA 69, at 642‑643, [45] per Gummow and Hayne JJ). I think it is sufficient to say that the common law test of causation stated in cases such as March v E. & M. H. Stramare Pty Limited and Another (1991) 171 CLR 506; [1991] HCA 12, and Medlin v The State Government Insurance Commission (1995) 182 CLR 1; [1995] HCA 5, may be the applicable test in a particular case, although ultimately the test is a statutory one informed by the policy and objectives of the legislation in question. Whether common law notions such as remoteness of damage and mitigation of loss are relevant is an open question, and may well depend on the particular statutory context.
Bearing in mind the context, there are two matters which lead me to reject Mr Townley’s challenge. First, the primary judge made an express finding that Mr and Mrs Selig relied on the two prospectuses not only to proceed with the investment in Neovest, but also with the purchase of the Wynnum units. He found that the prospectuses had been read or repeated to Mr and Mrs Selig. Secondly, the attractions of an investment in Neovest as described in the prospectuses included the payment of relatively large returns at regular intervals. That an investor would engage in other financial transactions taking advantage of such attractions is unsurprising, and this is what Mr and Mrs Selig did.
CONTRIBUTORY NEGLIGENCE AND PROPORTIONATE LIABILITY
Introduction
The references in this section to the Corporations Act and the ASIC Act are references to those Acts as they were at the relevant times.
Two broad issues are addressed in this section of the reasons. The first issue is whether Mr and Mrs Selig’s damages may and should be reduced because of contributory negligence on their part. Whether they may be reduced raises a question of law, and whether they should be reduced requires an examination of the primary judge’s findings and the evidence. Although I use the term contributory negligence for convenience, the relevant matter arises by statute, and the relevant provision refers to a claimant’s failure to take reasonable care (s 1041I(1B)(b) of the Corporations Act).
The primary judge held that contributory negligence was relevant to only some of the causes of action Mr and Mrs Selig had against Wealthsure and Mr Bertram. In practical terms, this was of no benefit to Wealthsure and Mr Bertram because Mr and Mrs Selig were awarded damages by reference to those causes of action where there was no reduction for contributory negligence. Wealthsure and Mr Bertram submitted that the plea of contributory negligence was available in relation to all of the causes of action against them. The primary judge found or assessed Mr and Mrs Selig’s contributory negligence at 15% in relation to those causes of action where he held it was relevant. Wealthsure and Mr Bertram submitted that their contributory negligence should have been assessed at 50%, or at least at substantially more than 15%.
The second issue is whether proportionate liability provisions apply to the liability of Wealthsure and Mr Bertram to Mr and Mrs Selig so that they are only liable for such proportion of the latter’s damages as is determined by the Court, having regard to the extent of their responsibility for the loss or damage.
The primary judge held that the proportionate liability provisions applied in respect of some of the causes of action that Mr and Mrs Selig established against the parties they sued, but not others. Again, in practical terms, the primary judge’s conclusions did not benefit Wealthsure and Mr Bertram, because damages were awarded against them by reference to those causes of action where the proportionate liability provisions did not apply. The primary judge did say, in relation to those causes of action where he held that it was relevant, that he would apportion responsibility for Mr and Mrs Selig’s loss and damage among the defendants as follows: Wealthsure and Mr Bertram, 60%, Mr Norton and Norton Capital, 25%, and the directors, 15%. Wealthsure and Mr Bertram challenge this apportionment. The same question arises in relation to Mr Townley, that is to say, whether the proportionate liability provisions apply to his liability to Mr and Mrs Selig.
It is necessary to reiterate at the outset of this section the contraventions or causes of action that the primary judge found Mr and Mrs Selig had established against Wealthsure and Mr Bertram and the other defendants at trial.
The primary judge found that Mr and Mrs Selig had established contraventions of the Corporations Act, the ASIC Act, and causes of action at common law, being the tort of negligence, breach of contract and misrepresentation.
The primary judge found that Wealthsure and Mr Bertram had breached two express terms and one implied term of their retainer with Mr and Mrs Selig, and had acted in breach of a duty of care which they owed to Mr and Mrs Selig. The primary judge found that, in providing the two statements of advice, Wealthsure and Mr Bertram contravened s 945A and s 945B, and that they were persons liable to Mr and Mrs Selig under s 953B(3) of the Corporations Act. He found that all of the conduct of Wealthsure and Mr Bertram between the period from 29 September 2004 and 18 April 2005 was both misleading and deceptive within s 1041H(1) of the Corporations Act and s 12DA(1) of the ASIC Act. This finding cannot be completely correct because both of these sections have exclusions from the scope of the general prohibition contained in the section of conduct that contravenes s 670A or s 728, or conduct in relation to a disclosure document or statement within the meaning of s 953A or s 1022A (s 1041H(3); s 12DA(1A)). His Honour’s finding that there was a contravention of s 945A and s 945B, and that the appellants were liable under s 953B, engages the exception relating to a disclosure document or statement, and it means, I think, that such conduct between 29 September 2004 and 18 April 2005 that gave rise to the contravention could not have also constituted a contravention of either s 1041H(1) or s 12DA(1).
The primary judge found that Wealthsure and Mr Bertram contravened s 1041E of the Corporations Act (i.e., false or misleading statements in relation to financial products not caring whether the statements are true or false). He also found that Wealthsure and Mr Bertram contravened s 12DB(1)(a) of the ASIC Act, (i.e., false representations about services) and breached the warranty implied by s 12ED of that Act (i.e., implied warranty of due care and skill).
As far as the other defendants were concerned, the primary judge found that the directors (other than Mr Townley), Mr Norton and Norton Capital acted in contravention of s 1041F (i.e., inducing a person to deal in financial products with knowledge or recklessness), and that all three directors acted in contravention of s 1041H of the Corporations Act. They had also contravened s 12DA(1) and acted in breach of s 1041E. Furthermore, they were liable under s 729 of the Corporations Act for misstatements and omissions in the second prospectus issued by Neovest and, although it is not entirely clear, the first prospectus issued by Neovest.
The Primary Judge’s Reasons
The primary judge noted that the contributory negligence and proportionate liability provisions in the Corporations Act, the ASIC Act, and the then Trade Practices Act 1974 (Cth) (the “Trade Practices Act”), were introduced by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth). Schedule 3 introduced s 1041I(1B) and ss 1041L to 1041S into the Corporations Act, s 12GF(1B) and ss 12GP to 12GW into the ASIC Act, and s 82(1B) and ss 87CB to 87CI into the Trade Practices Act.
The primary judge said that the amendments in the Corporations Act and the ASIC Act were in similar terms and that, in those circumstances, he was able to limit his consideration to the provisions of the Corporations Act.
The primary judge referred to a number of general features of Part 7.10 of the Corporations Act, which Part deals with market misconduct and other prohibited conduct relating to financial products and financial services. His Honour referred to the definition of the terms: financial products (s 763A); financial services (s 766A); and financial product advice (s 766B) (as to the latter, see also the definition in s 12BAB(5) of the ASIC Act). The primary judge noted that there was no dispute that the investment in Neovest was in relation to a financial product or financial service.
Section 1041I provides a right of action to a person who has suffered loss or damage by conduct of another person in contravention of ss 1041E, 1041F, 1041G or 1041H. Section 1041I(1B) is important because it provides for a claimant’s lack of care to be taken into account in certain circumstances. The full terms of s 1041I are as follows:
1041I Civil action for loss or damage for contravention of sections 1041E to 1041H
(1)A person who suffers loss or damage by conduct or another person that was engaged in in contravention of section 1041E, 1041F, 1041G or 1041H may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention, whether or not that other person or any person involved in the contravention has been convicted of an offence in respect of the contravention.
(1A) Subsection (1) has effect subject to section 1044B.
Note:Section 1044B may limit the amount that the person may recover for a contravention of section 1041H (Misleading or deceptive conduct) from the other person or from another person involved in the contravention.
(1B) Despite subsection (1), if:
(a)a person (the claimant) makes a claim under subsection (1) in relation to:
(i)economic loss; or
(ii) damage to property;
caused by conduct of another person (the defendant) that was done in contravention of section 1041H; and
(b) the claimant suffered the loss or damage:
(i)as a result partly of the claimant’s failure to take reasonable care; and
(ii)as a result partly of the conduct referred to in paragraph (a); and
(c) the defendant:
(i) did not intend to cause the loss or damage; and
(ii) did not fraudulently cause the loss or damage;
the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant’s share in the responsibility for the loss or damage.
Note:Division 2A also applies proportionate liability to a claim for damages under this section for a contravention of section 1041H.
(2)An action under subsection (1) may be begun at any time within 6 years after the day on which the cause of action arose.
(3)This section does not affect any liability that a person has under any other law.
(4)Section 1317S (which provides for relief from liability) applies in relation to liability under subsection (1) as if:
(a)the sections referred to in subsection (1) were civil penalty provisions; and
(b) proceedings under subsection (1) were eligible proceedings.
Note:Relief from liability under this section may also be available (depending on the circumstances) under Division 4.
There was no dispute before the primary judge but that Mr and Mrs Selig were claiming economic loss and that Wealthsure and Mr Bertram did not intend to cause the loss or damage and did not fraudulently cause the loss or damage.
Mr and Mrs Selig submitted at trial that s 1041I(1B) had no application to their claim pursuant to s 953B, or to their claim for breach of contract. The primary judge held that s 1041I(1B) only applied to a claim for a contravention of s 1041H, and did not apply to other statutory causes of action under the Corporations Act, or causes of action at common law. He said (at [1045]):
Section 1041(1B) [sic] has been deliberately drawn to only apply to a claim under s 1041H.
The primary judge noted that his conclusion was supported by the decision of Rares J in Wingecarribee Shire Council and Others v Lehman Brothers Australia Ltd (ACN 066 797 760) (In Liq) (2012) 301 ALR 1; [2012] FCA 1028, at [1118] and [1170], where his Honour dealt with the equivalent subsection in the ASIC Act (i.e., s 12GF(1B)).
Wealthsure and Mr Bertram do not challenge these conclusions on the appeal. They do contend that Mr and Mrs Selig’s lack of care should be taken into account in determining the damages awarded against them, but not because the primary judge erred in his construction of s 1041I(1B). They submit that Mr and Mrs Selig’s contributory negligence is relevant because of s 1041N(3)(a).
The primary judge turned to consider whether the proportionate liability provisions were relevant. Division 2A contains the principle of proportionate liability, and the Division is relevantly in the following terms:
Division 2A–Proportionate liability for misleading and deceptive conduct
1041L Application of Division
(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.
1041M Certain concurrent wrongdoers not to have benefit of apportionment
(1)Nothing in this Division operates to exclude the liability of a concurrent wrongdoer (an excluded concurrent wrongdoer) in proceedings involving an apportionable claim if:
(a)the concurrent wrongdoer intended to cause the economic loss or damage to property that is the subject of the claim; or
(b)the concurrent wrongdoer fraudulently caused the economic loss or damage to property that is the subject of the claim.
(2)The liability of an excluded concurrent wrongdoer is to be determined in accordance with the legal rules (if any) that (apart from this Division) are relevant.
(3)The liability of any other concurrent wrongdoer who is not an excluded concurrent wrongdoer is to be determined in accordance with the provisions of this Division.
1041N Proportionate liability for apportionable claims
(1) In any proceedings involving an apportionable claim:
(a)the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant’s responsibility for the damage or loss; and
(b)the court may give judgment against the defendant for not more than that amount.
(2)If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim:
(a)liability for the apportionable claim is to be determined in accordance with the provisions of this Division; and
(b)liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Division) are relevant.
(3) In apportioning responsibility between defendants in the proceedings:
(a)the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law; and
(b)the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings.
(4)This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings.
(5)A reference in this Division to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Division, under rules of court or otherwise.
…
1041PContribution not recoverable from defendant
A defendant against whom judgment is given under this Division as a concurrent wrongdoer in relation to an apportionable claim:
(a)cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant); and
(b)cannot be required to indemnify any such wrongdoer.
…
For reasons which will become clear, a significant point made by the primary judge in the context of his consideration of the proportionate liability provisions was that Mr and Mrs Selig’s claim for loss and damage was the same in relation to the various causes of action and in relation to the various defendants at trial. In other words, Mr and Mrs Selig did not claim that different loss and damage flowed from different causes of action against the one wrongdoer, or that different loss and damage flowed from the conduct of different wrongdoers. There is an appeal against damages, but that does not affect the proposition of present relevance, which is as I have described it. The primary judge expressed the proposition in various ways. He noted that Mr and Mrs Selig did not claim that their loss and damage had any discrete relationship as between the parties they sued. He said that Mr and Mrs Selig had not discriminated in the damages claimed against the directors, Mr Norton, Norton Capital and Neovest on the one hand, and Wealthsure and Mr Bertram on the other. The primary judge made a similar point a little later on in his reasons when he noted that s 1041L(2) referred to the same loss or damage, and that loss or damage in this context meant not the damages ultimately awarded by the Court, but rather, in the context of economic loss, the harm to the plaintiff’s economic interests (Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd and Others (2013) 247 CLR 613; [2013] HCA 10, at 628‑629, [24] per French CJ, Hayne and Kiefel JJ). Having made that point, the primary judge said that there was no argument in the case before him that Mr and Mrs Selig had not suffered “the single loss or damage, i.e. the same loss or damage”.
The primary judge said that the weight of authority favoured the submission of Wealthsure and Mr Bertram that there was a single apportionable claim where there was the same loss and damage, and he referred to that authority. He noted that there was authority to the contrary effect. He quoted at length from a decision of Hollingworth J in Keith Woods v Rodney Mario De Gabriele and Others [2007] VSC 177, at [8]‑[9], [24]‑[30] and [33]‑[36]. The primary judge said that he had reached the view that the statutory causes of action, other than the cause of action based on s 1041H, and the common law causes of action were not subject to the proportionate liability provisions.
The primary judge’s reasoning was as follows. The exceptions referred to in s 1041H(3) all related to sections where the Parliament had identified the persons who could be held liable, and he said that, in relation to s 670A that is done by s 670B, in relation to s 728 that is done by s 729, in relation to s 953A that is done by s 953B, and finally, in relation to s 1022A that is done by s 1022B. In those circumstances, there was no need for the general proscription of conduct contained in s 1041H(1). The sections excluded from the operation of s 1041H target particular persons and “it would be inappropriate to proscribe that conduct in general terms because it would apply to any person who has engaged in the proscribed conduct”. The primary judge also referred to s 1041N(3). His Honour considered that, if his interpretation of s 1041I(1B) was correct, it would mean that s 1041N(3) would be unworkable if it was given the meaning for which Wealthsure and Mr Bertram contended. It would mean that, although Mr and Mrs Selig’s damages under s 1041I(1B) would only be reduced in respect of s 1041IH conduct, “the resultant award after reduction would be apportioned without reference to the particular cause of action relied upon”. The primary judge also said that there was support for his construction in the wording of s 1041L(1) (conduct in contravention of s 1041H), s 1041L(3) (acts or omissions not causes of action), and s 1041L(4).
The primary judge concluded that only those claims under s 1041H that involve conduct by concurrent wrongdoers are apportionable.
The primary judge addressed apportionment in case the matter went further. In terms of relative culpability, he identified the failure of the various parties. First, as far as Wealthsure and Mr Bertram were concerned, the primary judge said that Mr and Mrs Selig would not have invested in Neovest but for their advice, and he said that no reasonably prudent financial adviser could have recommended to an investor that he or she purchase shares in Neovest. Secondly, as far as the directors were concerned, he said that their culpability lay in failing to identify in the two prospectuses issued by Neovest the financial position of Neovest’s principal debtors, being the Neolido group of companies. Thirdly, as far as Mr Norton and Norton Capital were concerned, the primary judge noted that they became involved in September 2004 and promised to market Neovest on terms very favourable to them, namely a commission of 13%. Mr Norton failed to carry out a proper due diligence report. He should have been able to identify the financial position of the Neolido group of companies, and, knowing the investment was risky, he should have undertaken various steps to protect investors against the risk. Mr Norton and Norton Capital approved the product, issuing a research report and a flyer.
The primary judge said that the most culpable parties were Wealthsure and Mr Bertram. They were in a position to assess the problems with the Neolido group of companies. They were aware that an investment in Neovest was a high risk investment, and they marketed the investment to Mr and Mrs Selig when it was never suitable to the latter’s needs. No prudent financial adviser could give the advice Wealthsure and Mr Bertram gave to Mr and Mrs Selig. The primary judge considered that the culpability of Wealthsure and Mr Bertram far exceeded that of the other parties. He also considered that the culpability of Mr Norton and Norton Capital exceeded that of the directors. As between the parties liable to Mr and Mrs Selig, he would have apportioned liability 60% to Wealthsure and Mr Bertram, 25% to Mr Norton and Norton Capital, and 15% to the directors. He said that he would not attribute any culpability to Neovest as it acted at the direction of its directors.
The primary judge rejected a submission that the causes of action arising under State law were apportionable under the Civil Liability Act 2003 (Qld). That conclusion is not challenged on appeal and there is no need to consider it any further.
The primary judge concluded in relation to those claims where contributory negligence was relevant, which he considered to be tort, contract and s 1041H, that a reduction of 15% was appropriate. Although apportionment was appropriate in relation to the claims under s 1041H, it was not appropriate in relation to the other successful claims of Mr and Mrs Selig, and the primary judge said that he would not make any declarations of apportionment.
The Arguments and their Resolution
Wealthsure and Mr Bertram submitted that the primary judge erred in his construction of the provisions of Division 2A of the Corporations Act and, in particular, ss 1041L and 1041N, and the equivalent sections in the ASIC Act (Sub-Division GA, ss 12GP and 12GR). They submitted that the primary judge overlooked s 1041L(2). They submitted that they, the directors, Mr Norton and Norton Capital, were concurrent wrongdoers because each of them was a person whose acts or omissions caused, independently of each other, the damage or loss that was the subject of Mr and Mrs Selig’s claim.
Wealthsure and Mr Bertram submitted that s 1041L(2) means that there is a single apportionable claim in respect of the same loss or damage. The loss or damage claimed by Mr and Mrs Selig in this case is relevantly the same loss or damage. Section 1041L(2) means also that there is a single apportionable claim, even if the claim is based on more than one cause of action (whether or not of the same or a different kind). In this case, there were a number of different causes of action against each of the defendants at trial who were found liable. Wealthsure and Mr Bertram submitted that this did not prevent Mr and Mrs Selig’s claim from being a single apportionable claim. Wealthsure and Mr Bertram referred to s 1041L(2) as the “umbrella provision”, and submitted that, as long as there was a claim for damages made under s 1041I for economic loss or damage to property caused by conduct that was done in contravention of s 1041H, and the same loss and damage, the subsequent section which actually provides for proportionate liability (i.e. s 1041N) is engaged.
Wealthsure and Mr Bertram submitted that s 1041N(3) required the Court to adopt the following analysis. The starting point is Mr and Mrs Selig’s damage or loss. Taken from that is the proportion of damage or loss attributed to Mr and Mrs Selig by reason of contributory negligence under any relevant law. A relevant law for the purposes of s 1041N(3) is s 1041H and s 1041I(1B). Although, as the primary judge found, and Wealthsure and Mr Bertram accept on the appeal, contributory negligence is only relevant in relation to the claim under s 1041H, it is relevant to that claim so it is contributory negligence under a relevant law. It is taken into account as to the whole of the damage or loss (irrespective of the fact that the parties sued are liable under various causes of action where there is no reduction for contributory negligence), otherwise s 1041N(3) is unworkable.
Mr Townley put similar arguments to those of Wealthsure and Mr Bertram and, for the most part, adopted them. At this stage, it is not necessary to mention him separately.
Mr and Mrs Selig submitted that the primary judge’s construction of Division 2A was correct, although I think their argument was somewhat narrower than the construction the primary judge adopted. All Mr and Mrs Selig had to do to obtain full damages against Wealthsure and Mr Bertram was to identify one claim against them which was not an apportionable claim, and that is all they sought to do. They submitted that, whatever causes of action are brought within the notion of a single apportionable claim in s 1041L(2), a claim which forms an exception to a claim under s 1041H(1) is not one of them. The claims which are not within the notion of a single apportionable claim are claims based on conduct which contravenes s 670A or s 728, or is in relation to a disclosure document or statement within the meaning of s 953A or within the meaning of s 1022A (s 1041H(3)).
In this case, the primary judge held that there was conduct by Wealthsure and Mr Bertram in relation to a disclosure document or a statement within the meaning of s 953A, and a contravention of ss 945A and 945B. As I understood Mr and Mrs Selig’s submission, it was that it would not make sense if conduct that was expressly excluded from the section which engaged the proportionate liability provisions (i.e., s 1041H) could then become subject to the proportionate liability provisions in Division 2A.
In Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200, Jagot J said the following (at [3485]):
[T]he reasoning of Barrett J in Reinhold v New South Wales Lotteries Corp (No 2) [[2008] NSWSC 187] suggests that because the s.1041E cause of action arises from the same facts and relates to the same loss as the s.1041H cause of action then it too is apportionable (as the whole claim becomes apportionable). That has the somewhat unlikely consequence that a s.1041E claim will almost invariably become an apportionable claim because to establish a contravention of s.1041E a plaintiff will almost necessarily also establish a contravention of s.1041H. Nonetheless, Barrett J’s reasoning has been repeatedly applied.
In Reinhold v New South Wales Lotteries Corporation (No 2) (2008) 82 NSWLR 762; [2008] NSWSC 187, Barrett J considered the proportionate liability provisions of the Civil Liability Act 2002 (NSW) in a case involving a claim brought against three parties to recover damages for breach of contract and negligence.
Section 34(1) of the Civil Liability Act 2002 (NSW) defined apportionable claims as, relevantly, for economic loss in an action for damages (in contract, tort or otherwise), claims arising from a failure to take reasonable care. I think Barrett J’s decision favours Mr and Mrs Selig’s argument, rather than Wealthsure and Mr Bertram’s argument. One of the issues was whether claims for breach of contract were apportionable claims within s 34(1). His Honour found that they were because, on the findings as made, rather than the facts as pleaded, the breach of contract resulted from a failure to take reasonable care. His Honour would not have needed to engage in the analysis he did at 770‑772, [26]‑[36], had he considered that the finding of a breach of duty of care by way of negligence was sufficient without further analysis to bring, not only that claim, but also the contract claim within the terms of s 34(1).
In Miletich and Others v Murchie and Others (2012) 297 ALR 566; [2012] FCA 1013, Gray J considered the proportionate liability provisions of the Trade Practices Act, being s 87CD, and s 24AI of the Wrongs Act 1958 (Vic). His Honour said (at 593, [108]) that Part VIA of the Trade Practices Act, which contained s 87CD, applied to the entirety of the claim for the applicants’ loss and damage, even though that claim was based in part, or in the alternative, on a cause of action pursuant to state legislation. In Rod Investments (Vic) Pty Ltd v Abeyratne & Ors (No 2) [2009] VSC 278, Hansen J, in the context of considering certain preliminary questions, made an observation (at [43]) which seems to support the notion that all causes of action fall within s 1041L(2) providing there is one cause of action within s 1041L(1).
There are authorities to the contrary and I refer, for example, to BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656, at [9] and [13] per Finkelstein J, and Bennett v Elysium Noosa Pty Ltd (in liq) (2012) 202 FCR 72; [2012] FCA 211, at 145‑147, [267]‑[276] per Reeves J.
As the primary judge noted, there is no authority of an intermediate appellate court which addresses the issue before this Court as to the application of the proportionate liability provisions.
In Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd and Others, the High Court considered the proportionate liability provisions of the Civil Liability Act 2002 (NSW). The particular issue in that case was whether the acts of certain fraudsters in relation to a loan and security had caused the same loss to the lender as the loss and damage caused to the lender by solicitors engaged by the lender to draw a mortgage and loan agreement. The issue arose out of the definition of “concurrent wrongdoer” in s 34(2) of the Civil Liability Act 2002 (NSW).
French CJ, Hayne and Kiefel JJ referred to the common law principle of solidary liability, where two or more persons are each liable for the discharge of the whole of one obligation. I note that the common law principle that judgments are given in solidum against tortfeasors severally liable was discussed at length in Barisic v Devenport and Others [1978] 2 NSWLR 111. French CJ, Hayne and Kiefel JJ discussed the final report of the inquiry into the law of joint and several liability completed by Professor Davis in 1995 (the Davis Report) (Commonwealth of Australia, Inquiry into the Law of Joint and Several Liability: Report of Stage Two, 1995).
As I have said, the particular problem that arose in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd, namely, whether the fraudsters’ conduct materially contributed to the loss or damage suffered by Mitchell Morgan and claimed by it from Hunt and Hunt, does not arise in this case. That is because the primary judge found and, subject to Mr Townley’s complaint that he ought not to have been held liable for other losses (which I have rejected), his Honour’s finding was not challenged on the appeal, that the conduct of the directors, Mr Norton, and Norton Capital materially contributed to the same loss or damage as Mr and Mrs Selig claimed against Wealthsure and Mr Bertram.
It is relevant to consider whether the Davis Report provides any assistance in the resolution of the issue before this Court. The short answer is that, expressly at least, it does not. The focus of the report is on the joint and several liability of concurrent wrongdoers where the damages claimed are economic loss or relate to property damage. Professor Davis discusses the joint and several liability of concurrent tortfeasors and statutory provisions giving them rights of contribution and indemnity as against each other. He referred to provisions proscribing misleading or deceptive conduct in trade or commerce, or in relation to securities, and he noted that a professional person providing incorrect information or advice may be guilty of misleading conduct, and, further, that such a person may be held liable despite all reasonable care on his or her part. Professor Davis considered that proportionate liability should extend to these statutory provisions because of “the similarities between professional liability for negligence and under these statutes”. He said:
(i)Liability for misleading conduct
It has been noted that two or more persons may, by their separate breaches of section 52 of the Trade Practices Act 1974 (Cth) (or its equivalent in the fair trading legislation of the States and Territories), cause loss or damage to another person. As the law stands at present, while it is assumed that those who have brought about that loss would be regarded as jointly and severally liable, it is doubtful whether any of them has a right of contribution against another or others. Equally, two or more who have caused loss or damage by a contravention of section 995 of the Corporations Law would presumably be jointly and severally liable, but would be unlikely to have any rights of contribution one against the other.
Although liability in negligence is different from these forms of statutory liability, in that the statutory provisions may be infringed despite all reasonable care having been taken, there are many similarities between the two forms of liability. In particular, so far as the present inquiry is concerned, both forms of liability may arise when a professional person makes a misstatement on which others rely, to their financial detriment.
Because of the similarities between professional liability for negligence and under these statutes, it is anomalous that, in the case of multiple wrongdoers, any one of such a group should be exposed to a considerably different extent of liability depending solely on whether action is brought at common law or under one or other of the statutory provisions. On the other hand, a contravention of section 52 of the Trade Practices Act, or its State or Territory equivalent, may arise from a multitude of circumstances far removed from that of a professional person making a statement which turns out to be incorrect. Hence, a solution which removed the anomaly just referred to in relation to professional liability may bring with it further difficulties in relation, say, to a contravention of section 52 constituted by misleading the public as to the trading relationship between one business and its rival.
Subject to the comments below on claims arising out of consumer transactions, it is therefore recommended that, if two or more are together responsible for a contravention of section 52 of the Trade Practices Act (or its equivalent in the fair trading legislation of the States and Territories) or of section 995 of the Corporations Law, each should be liable only in proportion to the degree of responsibility which he or she bears for the contravention, and not jointly and severally.
To my mind, this suggests that it was envisaged that the proportionate liability provisions, in addition to being limited to claims for economic loss and for damage to property, would be limited to causes of action involving a lack of reasonable care, or misleading or deceptive conduct, or both. The idea that, in addition, they would include other causes of action having a quite different basis for imposing liability does not appear to have been contemplated. Nevertheless, (and self‑evidently) it is the words of the statute which determine the issue.
The starting point in terms of an analysis of the statutory provisions is s 1041N. Subsection (1)(a) provides that, in a proceeding involving an apportionable claim, the liability of a defendant who is a concurrent wrongdoer is limited to an amount reflecting that proportion of the damages or loss claimed that the Court considers just “having regard to the extent of the defendant’s responsibility for the damage or loss”.
Section 1041L(1) defines apportionable claim as a claim for damages made under s 1041I for economic loss or damage to property caused by conduct that was done in contravention of s 1041H. Mr and Mrs Selig made a claim for damages for economic loss. The primary judge awarded them damages for economic loss. Mr and Mrs Selig claimed against each of the groups of defendants at trial, being Wealthsure and Mr Bertram, the directors, and Mr Norton and Norton Capital, that they engaged in conduct in contravention of s 1041H, which caused them economic loss. They claimed that other conduct in breach of various legal obligations also caused the economic loss. The primary judge found that each group of defendants at trial had contravened s 1041H. His Honour also found that each group of defendants contraventions had materially contributed to the damage and loss claimed by Mr and Mrs Selig. Another way of putting this point is that, on the primary judge’s findings, Mr and Mrs Selig would have succeeded in obtaining the damages they were awarded even if the only claims against the defendants were for contraventions of s 1041H(1). In my opinion, Mr and Mrs Selig’s claims against the defendants fell within the definition of apportionable claims within s 1041L(1) of the Corporations Act.
Wealthsure and Mr Bertram were concurrent wrongdoers within s 1041L(3). They were one of two or more persons whose acts or omissions caused, independently of each other, the loss or damage that was the subject of Mr and Mrs Selig’s claims.
Section 1041N(1) refers to any proceedings involving an apportionable claim. Section 1041L(1) defines apportionable claim. It is necessary to consider when there is an apportionable claim, and what claims are not an apportionable claim. Section 1041N(2) provides that the proportionate liability provisions only apply to an apportionable claim, whereas the liability for other claims is to be determined in accordance with the legal rules, if any, that, apart from Division 2A, are relevant.
Section 1041L(2) is a critical subsection because it identifies the circumstances in which there is a single apportionable claim or an apportionable claim for the purposes of s 1041N(1). The important features of that subsection are that the identity of the loss or damage is the key consideration, and that it specifically refers to more than one cause of action, whether or not of the same or a different kind. In this case, we have the same loss and damage and, as the subsection states, it matters not that the claims in relation to that loss or damage are based on not only a cause of action for a contravention of s 1041H(1), but also on causes of action of a different kind. There was an apportionable claim for the purposes of s 1041N(1). The reference in s 1041N(2) to a proceeding involving a claim that is an apportionable claim and a claim that is not an apportionable claim is dealing with a proceeding involving claims for different loss or damage. This is the effect of s 1041L(2), and it means that claims for different loss or damage are not part of an apportionable claim. There were no such claims in this case.
There are two arguments to be considered before I reach a final conclusion. The first argument was advanced by Mr and Mrs Selig. It was that the defendants were found liable on causes of action specifically excluded from the proscription on misleading or deceptive conduct in s 1041H(1). Those causes of action are based on conduct identified in s 1041H(3). The submission was that it would not make sense if causes of action specifically excluded from s 1041H(1) were held to be subject to the proportionate liability provisions in Division 2A where the precondition for the operation of the proportionate liability provisions is conduct that contravened s 1041H(1).
I reject this argument because it fails to recognise the distinction between the conduct which gives rise to liability on the one hand, and the critical importance of the concept of the same loss and damage for the purposes of the proportionate liability provisions on the other. In this case, there were a number of acts and omissions over a period of time, some giving rise to contraventions under s 1041H(1), others to contraventions falling within the sections and matters identified in s 1041H(3), and yet others giving rise to liability by reference to other legal obligations. The fact is that the primary judge found that they had all materially contributed to the same loss or damage. In my opinion, that engaged the proportionate liability provisions in relation to that same loss or damage.
The second argument was a matter identified by the primary judge. He noted that the acceptance of the argument advanced by Wealthsure and Mr Bertram would lead to different results for no apparent reason as far as the application of the contributory negligence provisions are concerned.
Assume a claim against one defendant involving conduct in contravention of s 1041H, and in contravention of other sections of the Corporations Act, and of various obligations at common law. Assume a lack of care by the plaintiff within s 1041I(1B) of the Corporations Act which leads to a reduction in the plaintiff’s damages. On the primary judge’s construction of s 1041I(1B) (and, as I have said, his construction was not challenged by Wealthsure and Mr Bertram on the appeal), the plaintiff’s damages are reduced, but only in relation to a claim brought under s 1041I(1) for a contravention of s 1041H.
Assume a similar case, but one where there are a number of defendants. If the proportionate liability provisions applied, the primary judge said (in the course of rejecting the argument that they did apply) that that would mean that the plaintiff’s lack of reasonable care or contributory negligence under s 1041H(1B) would be taken into account before liability was apportioned between the defendants. That would follow from s 1041N(3), because the plaintiff would be found contributorily negligent under a relevant law within s 1041N(3).
I agree that there is no apparent reason for these different results and it is a factor against the construction of the proportionate liability provision advanced by Wealthsure and Mr Bertram. However, I think the effect of the words in s 1041L(2) are too clear to be outweighed by this factor.
In conclusion, it is not easy to discern Parliament’s intention in resolving the construction issue raised in this case. On the one hand, it is not surprising that the proportionate liability provisions would not be restricted to the one cause of action (i.e., a contravention of s 1041H(1)) because it is quite common for a particular set of facts to give rise to a number of causes of action, and it would seem artificial that the proportionate liability provisions could be avoided by a different legal characterisation of the facts. On the other hand, it might be considered surprising if the proportionate liability provisions applied to causes of action far removed from a general proscription on misleading or deceptive conduct, and, in particular, causes of action having different elements and a different rationale. These considerations might have led to a provision bringing within the proportionate liability provisions contraventions of s 1041H(1) and other similar causes of action or causes of action of the same kind. However, I think Parliament has gone further than this in enacting s 1041L(2). Parliament used the concept of the same loss or damage and made it clear that different kinds of causes of action are also included.
The proportionate liability provisions, including the allowance for contributory negligence, applied in relation to Mr and Mrs Selig’s claims.
The Assessment of Contributory Negligence and the Apportionment between the Respondents
I start with the challenge by Wealthsure and Mr Bertram to the primary judge’s assessment of Mr and Mrs Selig’s contributory negligence at 15%. Wealthsure and Mr Bertram submitted on the appeal that the primary judge should have assessed Mr and Mrs Selig’s contributory negligence at 50%. Mr and Mrs Selig have not filed a cross-appeal, so that it is not said by them that they should not have been found guilty of contributory negligence or that their responsibility should have been fixed at less than 15%.
The primary judge did not set out his reasons for finding Mr and Mrs Selig guilty of contributory negligence or for reaching his assessment of 15%. He simply said that Mr and Mrs Selig’s claims in tort and contract, and under s 1041H(1) of the Corporations Act, should be reduced by 15%.
Section 1041I(1B) of the Corporations Act refers to a claimant suffering loss or damage as a result partly of his or her failure to take reasonable care and, if that is so, a reduction in damages recovered in relation to the loss or damage claimed “to the extent to which the court thinks just and equitable having regard to the claimant’s share in the responsibility for the loss or damage”. This phrase is sufficiently similar to phrases in various pieces of State legislation dealing with contributory negligence as between a claimant and a tortfeasor to suggest that the well‑established principles enunciated in Pennington v Norris (1956) 96 CLR 10; [1956] HCA 26, and Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529; [1985] HCA 34 are relevant.
In Pennington v Norris, the Court said (at 16) that a claimant’s share in the responsibility for damage required an examination of the degree of culpability by reference to the degree of departure from the standard of care of the reasonable man. In Podrebersek v Australian Iron & Steel Pty Ltd, the Court said that, in addition to that matter, regard must be had to the relative importance of the acts of the parties in causing the damage.
In Pennington v Norris, the Court also made the point (at 15‑16) that an appellate court will be slow to interfere with an apportionment by a judge or by a jury. That is because the discretion given by the section is a wide one. In Podrebersek v Australian Iron & Steel Pty Ltd, the Court referred with approval (at 532) to the following statement in British Fame (Owners) v MacGregor (Owners) [1943] AC 197, at 201 per Lord Wright:
It is a question of the degree of fault, depending on a trained and expert judgment considering all the circumstances, and it is different in essence from a mere finding of fact in the ordinary sense. It is a question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds. It is for that reason, I think, that an appellate court has been warned against interfering, save in very exceptional circumstances, with the judge’s apportionment.
One other matter of a general nature must be mentioned. The apportionment process under s 1041I(1B) may engage different principles where a defendant’s contravention of s 1041H(1) is innocent in the sense that there is no lack of care on his part. In such a case, the comparison in terms of responsibility for loss or damage is between a defendant’s misleading or deceptive conduct, albeit innocent, and a claimant’s lack of care within s 1041I(1B). This case is not such a case because there is abundant evidence of a lack of care on the part of Wealthsure and Mr Bertram. It is not therefore necessary to consider the issue (Valcorp Australia Pty Ltd v Angas Securities Limited [2012] FCAFC 22, at [110]‑[111]).
The submissions of Wealthsure and Mr Bertram on the apportionment for contributory negligence were contained in the written outline of submissions in chief (paragraphs 39 to 41). The conduct of Mr and Mrs Selig relied on by Wealthsure and Mr Bertram was the same conduct as they relied on in their arguments with respect to causation and, therefore, the conduct said to be relevant to contributory negligence all relates to the consequential losses claimed by Mr and Mrs Selig. This is significant because the allowance his Honour would have made was 15% of the overall loss or damage and yet the conduct of Mr and Mrs Selig was relevant to half, or just over half, of the principal sum (i.e., the sum before compound interest was added).
Paragraph 14 of the Supplementary Notice of Appeal challenges various factual findings of the primary judge without identifying the consequences of upholding the challenges and, in that sense, it is unhelpful. Nevertheless, doing the best I can, it seems to identify the following acts of contributory negligence:
(1)a profligate lifestyle and excessive living expenses (paragraphs 14.1, 14.2, 14.5, 14.7, 14.9 and 14.10);
(2)excessive borrowings (paragraph 14.7);
(3)reckless statements to financiers (paragraph 14.8);
(4)borrowings when aware the dividends from Neovest would not meet interest payments or borrowings (paragraphs 14.9 and 14.10).
As to the first matter, it is to be noted that at trial, Mr and Mrs Selig argued that their loss and damage represented the deterioration in their financial position between two dates. The primary judge rejected this approach to an assessment of their damages because he considered that it would over compensate Mr and Mrs Selig. In the course of explaining his approach to damages, he said that Mr and Mrs Selig’s financial position deteriorated because of the implementation of the strategy (i.e., to invest in Neovest and the associated activities), and also because of the manner in which they lived and because monies were expended on living expenses. His Honour went on to say the following (at [1271]‑[1272]):
As I have said earlier, I reject the proposition in Schedule 2 that the whole of the plaintiffs’ financial position is as a result of the implementation of the strategy.
That is why I have attempted to make a rough and ready assessment of the financial loss caused by the implementation of the strategy, as distinct from the financial loss caused by the plaintiffs’ own lifestyle.
I think the primary judge took lifestyle matters into account when assessing damages. He was not required to take them into account again when assessing contributory negligence. I would only add, as to paragraph 14.1, which asserts that Mr and Mrs Selig’s real annual living expenses at the relevant time well exceeded their asserted living expenses of $52,000 per year, that the primary judge was aware that Mr and Mrs Selig’s living expenses exceeded $52,000 per annum.
In Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200, Jagot J accepted that claims in respect of contraventions of s 1041E were, in the circumstances of that case, subject to the proportionate liability provisions. At the end of a very long judgment, Jagot J said:
[3485]I accept LGFS’s submission that although damages for contravention of s 1041E of the Corporations Act are not apportionable, in this case, those claims arise from the same facts as the contraventions of s 1041H which are apportionable. I adopt LGFS’s submission as follows in this regard:
[T]he reasoning of Barrett J in Reinhold v New South Wales Lotteries Corp (No 2) [[2008] NSWSC 187] suggests that because the s.1041E cause of action arises from the same facts and relates to the same loss as the s.1041H cause of action then it too is apportionable (as the whole claim becomes apportionable). That has the somewhat unlikely consequence that a s.1041E claim will almost invariably become an apportionable claim because to establish a contravention of s.1041E a plaintiff will almost necessarily also establish a contravention of s.1041H. Nonetheless, Barrett J’s reasoning has been repeatedly applied.
This passage is supportive of the appellants’ submission in the present case. Similarly, Gray J in Miletich v Murchie [2012] FCA 1013 at [107]-[108]; (2012) 297 ALR 566 at 593 considered that there was a single apportionable claim under s 87CB of the TPA, even though the claim for the loss and damage was based on more than one cause of action and not all arising under the TPA.
Finally, a passage by way of obiter in the reasons of Hansen J in Rod Investments (Vic) Pty Ltd v Abeyratne (No 2) [2009] VSC 278 at [43], indicates that his Honour accepted that s 1041L(2) may be invoked when there is at least one apportionable claim within the meaning of s 1041L(1).
Consideration
The issue is one of statutory construction. In Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, the plurality described the approach to be adopted as follows:
[69]The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined “by reference to the language of the instrument viewed as a whole”. … Thus, the process of construction must always begin by examining the context of the provision that is being construed.
[70]A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court “to determine which is the leading provision and which the subordinate provision, and which must give way to the other”. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme.
[71]Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. …
(Citations omitted)
Emphasis on the necessity for regard to the text of the statute is evident in later decisions of the High Court, for example, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41 at [47]; (2009) 239 CLR 27 at 46-7; Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 293 ALR 257. In the latter case, French CJ, Hayne, Crennan, Bell and Gageler JJ said at [39] 268-9:
“This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text.” So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself.
(Citation omitted)As noted earlier, s 1041N is the principal operative provision. Subsection (1) limits the liability of a concurrent wrongdoer for “an apportionable claim” to the amount which the Court considers just having regard to the extent of the defendant’s responsibility for the plaintiff’s loss and damage. Subsection (2) applies to those cases involving both an “apportionable claim” and a claim which is not an “apportionable claim”, stipulating that the liability for the apportionable claim is to be determined in accordance with the provisions of Division 2A and the liability for the other claim to be determined in accordance with the legal rules, if any, which, apart from Division 2A, are relevant.
Section 1041L(1) indicates that an “apportionable claim” is a claim for damages made under s 1041I for economic loss or damage to property caused by conduct done in contravention of s 1041H. Subsection (3) indicates that a “concurrent wrongdoer” in relation to a claim, is a person who is one of two or more persons whose acts or omissions caused, independently of each other or jointly, the damage or loss that is the subject of the claim.
The issue for construction on this part of the appeal arises from the terms of s 1041L(2) which, for convenience, I will repeat:
(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).
The issue is really that of whether the expression “the claim for the loss and damage is based on more than one cause of action (whether or not of the same or a different kind)” refers only to causes of action which are themselves apportionable claims or, alternatively, to causes of action more generally.
In my opinion, the former is the proper construction. My reasons for that conclusion follow.
The text of s 1041L(2) is significant. Having defined an “apportionable claim” in subs (1), subs (2) specifies a circumstance in which there will be a single apportionable claim. That is suggestive, to my mind, of a legislative intention that claims which are themselves apportionable claims are, in the stipulated circumstance, to be regarded as a single claim. It seems improbable that a claim which is not, by definition, an apportionable claim should be regarded as part of a single apportionable claim. Had that been intended, one would have expected subs (1) to have expressly been made subject to subs (2).
I consider that this construction of subs (2) is confirmed by s 1041L(4). Effect must be given to that subsection. It expressly limits apportionable claims to those claims specified in subs (1). In other words, whatever an apportionable claim may be, it is limited to claims pursuant to s 1041I in respect of contraventions of s 1041H. A construction of subs (2) which has the effect of including in an apportionable claim any claim at all, whether made under s 1041H or otherwise, providing that it is in respect of the same loss or damage, is inconsistent with subs (4). The submissions of Wealthsure and Mr Bertram did not reconcile that inconsistency.
This construction might be more obvious if s 1041L(1) referred to claims for loss or damage resulting from contraventions of two or more provisions in the Corporations Act or otherwise to claims arising under the common law or under different legislation. Section 34(1) of the Civil Liability Act 2002 (NSW) considered in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613 and by Barrett J in Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) 82 NSWLR 762, is an example of this kind of provision. One could readily conclude in the case of provisions of that kind that it is only claims in respect of contraventions of the nominated provisions which can give rise to a single apportionable claim. But the principle remains the same: s 1041L(1) identifies what may be an apportionable claim.
In context, subs (2) seems to be in the nature of a facilitative, rather than a substantive, provision. I note in this respect that the expression “single apportionable claim” is not used elsewhere in the Corporations Act. No rights, entitlements or obligations are identified separately as arising from the characterisation of claims as a “single apportionable claim”. This rather suggests that subs (2) is intended to facilitate the application of Division 2A and, in particular, s 1041N when there are two or more apportionable claims in respect of the same loss or damage. In particular, by specifying that multiple apportionable claims in respect of the same loss and damage are to be regarded as a single apportionable claim, s 1041L(2) seeks to address the difficulties, discussed by the Court of Appeal in New South Wales in Barisic v Devenport [1978] 2 NSWLR 111, which can arise when the contributory negligence of a plaintiff is to be assessed in relation to each of several tortfeasors (and reflected in the judgment) and when the rights of the tortfeasors between themselves are to be determined taking account of their respective individual liabilities to the plaintiff.
There was a tendency in the submissions of Wealthsure and Mr Bertram to treat a claim under s 1041H as raising a single cause of action, with the effect that the expression “based on more than one cause of action (whether or not of the same or a different kind)” implied necessarily that s 1041L(2) incorporated claims made other than under s 1041H (providing that they were in respect of the same loss or damage). In my respectful opinion, this understanding of the expression is not correct.
It is commonplace for judges and lawyers to use the term “cause of action” as a reference to the nature of the right of action asserted by a plaintiff. Lawyers will refer, for example, to a cause of action as being breach of contract, negligence, breach of the former s 52 of the TPA etc. However, this usage is often a shorthand label for a more extended meaning.
Many of the judicial elaborations of the term “cause of action” have occurred in the context of limitations of action provisions which require proceedings to be commenced within a fixed period after the “cause of action” accrues. In that context, the term has been held to refer to the elements necessary to give rise to a right of action. For example, in Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581, Sackville J (with whom Foster and Lehane JJ agreed) said in relation to s 14(1) of the Limitation Act 1969 (NSW) at 595:
The classic formulation of a “cause of action” is that of Brett J in Cooke v Gill (1873) 8 LR CP 107 at 116:
“‘cause of action’ has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed – every fact which the defendant would have a right to traverse.”
This formulation was adopted by Lord Esher MR in Read v Brown (1888) 22 QBD 128 at 131; see also Trower & Sons Ltd v Ripstein [1944] AC 254 at 263 per Lord Wright. In Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234 at 245, Wilson J said that the:
“concept of a ‘cause of action’ would seem to be clear. It is simply the fact or combination of facts which gives rise to a right to sue. In an action for negligence, it consists of the wrongful act or omission and the consequent damage … Knowledge of the legal implications of the known facts is not an additional fact which forms part of a cause of action. Indeed, a person may be well appraised of all the facts which need to be proved to establish a cause of action but for want of taking legal advice may not know that those facts give rise to a right to relief.”
See also Carter v Egg & Pulp Marketing Board (Vic) (1942) 66 CLR 557 at 600 per Williams J.
The term “cause of action” is not defined in the Corporations Act. It is, however, used in a number of its provisions. These include the limitation provisions contained in ss 283F(2), 601MA(2), 601XAA(3), 670B(2), 729(3), 991A(3), 1022B(6), 1041I(2) and 1325(4), as well as in the transitional provision contained in s 1466. The reasoning of Sackville J in Torrens Aloha is apposite to the term’s usage in this context.
Section 1466 is particularly pertinent presently because it too was introduced into the Corporations Act by the CLERP Act. It provides that the amendments effected by Sch 3 to the CLERP Act (which included the proportionate liability provisions) apply to causes of action that arise on or after the date on which Sch 3 commences. Section 1041I(2) is also pertinent presently as s 1041L(1) defines an apportionable claim in part by reference to claims made under s 1041I. It is reasonable to conclude that the term “cause of action” in these provisions and in s 1041L is used in each case with a consistent meaning.
This meaning of the term “cause of action” is inconsistent with the view that the expression “more than one cause of action” necessarily implies causes of action other than contraventions of s 1041H.
It is obvious that s 1041H may be contravened in a number of ways and may therefore give rise to multiple causes of action. This is evident from the diverse ways by which a person may, in relation to a financial product or a financial service, engage in conduct which is misleading or deceptive, or likely to mislead or deceive in contravention of that section. It is quite plausible that a plaintiff may, in the one proceeding, allege that more than one contravention of s 1041H by two or more concurrent wrongdoers has caused the claimed loss or damage. It is also plausible that the causes of action which might arise under s 1041H may be of similar or different kinds. Thus, s 1041L(2) may have a sensible application in relation to two or more claims in respect of contraventions of s 1041H.
There are other contextual considerations supporting the view that s 1041L(2) refers only to causes of action which are themselves apportionable claims. Division 2A has the heading “Proportionate liability for misleading and deceptive conduct”. The construction for which Wealthsure and Mr Bertram contend would have the effect that proportionate liability would apply not only in cases of misleading and deceptive conduct but in relation to other contraventions of the Corporations Act as well. That goes beyond the scope of the division suggested by its heading.
The references to “a claim” and “the claim” in s 1041L(3) must be a reference to a claim to which the Division applies, that is, “an apportionable claim” under s 1041L(1). The principle that words used more than once in the one provision may be taken to be used with a consistent meaning suggests that this meaning is also appropriate in the case of subs (2).
The Judge attached significance to the fact that several of the proscriptions in the Corporations Act have a remedial provision which is specific to the particular proscription. For example, and of relevance in this case, s 670B in the case of s 670A; s 729 in the case of s 728; s 953B(2) in the case of s 953B(1) and s 1022B(2) in the case of s 1022B(1). In each case, the provided remedy is available only to specified persons.
In my respectful opinion, the Judge was correct to attach significance to this circumstance. It seems improbable that, despite s 1041L(1) having limited the application of Division 2A to claims made under s 1041I (and thereby excluding Division 2A from applying to these other remedial provisions), subs (2) should have the effect, as though by a side wind, of including claims made under provisions other than s 1041I. The incongruity involved in the contrary construction is emphasised by the consideration that s 1041H(3) specifically excludes conduct in contravention of ss 670A, 728, 953A and 1022A from amounting to a contravention of s 1041H. It seems improbable that the legislature, having carved out conduct contravening those provisions from s 1041H and having limited s 1041L(1) to conduct done in contravention of s 1041H, nevertheless intended that conduct in contravention of those provisions should be the subject of the proportionate liability provisions when the same loss or damage is involved. One would have thought that, if that was the legislative intention, it would have been easy for the legislature to say so by express words in s 1041L(1).
The Judge also attached significance to the circumstance that s 1041I confines a reduction on account of a plaintiff’s contributory negligence to claims in respect of contraventions of s 1041H. Yet, if the construction for which Wealthsure and Mr Bertram contend be correct, s 1041N(1) could have the effect that a plaintiff’s own responsibility for the loss and damage would have to be taken into account in relation to all causes of action comprising the single apportionable claim on which the plaintiff succeeds. This would be so because s 1041N(1) provides that judgment may be entered against a defendant only to the extent of the defendant’s responsibility for the loss and damage, something which could be determined only after account had been taken of the plaintiff’s own responsibility. I have said “could” because it is possible that s 1041N(1) may be construed to avoid this possibility. It is not necessary to determine that question presently. At the least, it can be said that the construction urged by Wealthsure and Mr Bertram does give rise to this apparent difficulty.
The Judge said that s 1041N(3) would become “unworkable” on the appellants’ construction (at [1096]). Despite the critique by Wealthsure and Mr Bertram, I consider that the Judge’s conclusion in this respect has force.
Section 1041N(3) concerns the manner in which responsibility is to be apportioned between defendants in proceedings involving an apportionable claim. The Court is required first to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent “under any relevant law”. It is the expression “under any relevant law” which gives rise to the difficulty. Section 1041I(1B) appears to be such a relevant law. The Law Reform Act 1995 (Qld) and its interstate and Territory counterparts also appear to be such a relevant law in relation to the causes of action to which they apply. But if a contravention of some other provision in the Corporations Act forms part of the single apportionable claim, what is the “relevant law” which will require reduction of the damages to which the plaintiff would otherwise be entitled for losses caused by such contraventions? Counsel could not identify any other “relevant law” which would require reduction in this circumstance. If s 1041N(1) is not regarded as such a “relevant law”, the consequence will be that there will be some loss or damage for which a plaintiff would be entitled to an award of damages without reduction, and some which would warrant reduction. This would seem to involve the practical difficulties of the kind discussed in Barisic v Devenport [1978] 2 NSWLR 111 which, as indicated earlier, s 1041L(2) seems intended to avoid.
If, on the other hand, s 1041N(1) is regarded as a “relevant law” for the purposes of subs (3) then there exists the incongruity to which I referred earlier, namely, that a reduction for contributory negligence which is not otherwise contemplated by the specific remedial provisions is mandated.
To my mind, there is also some incongruity in understanding s 1041L(2) as operating to establish a claimed contravention of s 1041H as a gateway through which access may be had to the proportionate liability provisions in respect of any claim for the same economic loss or damage to property. It is difficult to understand why the legislature would have adopted such a drafting technique. It would have been much simpler for the legislature to have identified in subs (1) all of the provisions a claimed contravention of which would give rise to an apportionable claim.
The decisions of Jagot J in Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 at [3485] and of Gray J in Miletich v Murchie [2012] FCA 1013; (2012) 297 ALR 566, to which I referred earlier, do not, with respect, cause me to adopt a different view. The submission of the defendant in Bathurst Regional Council which was accepted by Jagot J appears to have attached a significance to the reasons of Barrett J in Reinhold which was not warranted, bearing in mind the material differences between s 34(1) of the Civil Liability Act 2002 (NSW), on the one hand, and s 1041L(1) on the other. The reasons of Gray J in Miletich v Murchie do not advert to the matters mentioned above.
For these reasons, I conclude that the construction proposed by Wealthsure and Mr Bertram of s 1041L(2) should be rejected. In my opinion, the Judge was correct to regard s 1041N as applying only to the Seligs’ claim brought pursuant to s 1041I in respect of the contravention of s 1041H. This means that the Judge was correct not to make any deduction for the Seligs’ contributory negligence in respect of those claims other than the contravention of s 1041H and the common law breach of contract and negligence claims. The Judge was also correct in not entering judgment against each defendant only to the extent of their respective responsibilities for the Seligs’ losses.
As indicated earlier, I have addressed the contributory negligence and proportionate liability issues in this section by reference to the provisions in the Corporations Act. Given that the counterpart provisions in the ASIC Act are in relevant respects identical, this reasoning applies in relation to those provisions as well.
Issue 9: The allocation of responsibility
My conclusion on the last issue means that, strictly speaking, the challenge to the Judge’s assessment of the Seligs’ contributory negligence and to his allocation of responsibility amongst the defendants need not be addressed. Similarly, the submissions of Mr Townley that the Seligs’ claims were not a single apportionable claim, and that he, Mr Spencer and Ms Perovich were not concurrent wrongdoers with the other defendants, to which I referred in the previous section of these reasons, do not need to be addressed.
However, in case my conclusion be wrong, I indicate my view that each of those challenges and submissions should be dismissed, for the reasons given by Besanko J.
Issue 10: Factual findings
Mr Townley complained of several factual findings by the Judge. These included his conclusion that it was Neovest, and not Neo Lido or Neolido Holdings which had to pay the commission to Norton Capital of 13.5% on capital raised pursuant to the second Neovest prospectus; that that commission would have to be paid annually; that the scheme contemplated by the Neovest prospectus “couldn’t work” and was a Ponzi scheme; that the evidence of an ASIC officer as to the solvency of Neo Lido and Neolido Holdings should be accepted; and that the Neolido Group was insolvent at the time of the Seligs’ investment, as well as other matters.
I take the view that it is unnecessary to consider and determine each of these individual complaints. The submissions made on Mr Townley’s behalf did not address all these matters. In some cases, there was no more than a bald assertion that the Judge’s finding was wrong unaccompanied by any attempt to identify the nature of an error, let alone an appellable error. Nor did the submissions indicate that the alleged errors, if established, had had a material effect on the Judge’s findings. The appeal lies against the Judge’s orders, and not against his individual findings.
Conclusion
The effect of these reasons is that I would uphold the appeal by Wealthsure and Mr Bertram on one ground only, namely, that the Judge erred in awarding compound interest as damages in respect of the capital losses caused by the forced sale of the Seligs’ two Sea Aura apartments. That has the effect of reducing the Seligs’ damages to $1,651,680.
However, the Seligs are entitled to interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) in respect of those capital losses.
One of the Sea Aura units was sold on 7 December 2007 and the other on 15 March 2010. The Judge considered that the Seligs lost about $135,000 in equity in the first sale and about $200,000 in equity in the second. However, having regard to other contributing causes, the Judge allowed $200,000 for the loss of equity. He did not apportion that amount between the two units.
On the basis of the proportion of the overall loss of equity allowed by the Judge, it is appropriate to allocate $80,000 of the $200,000 allowed for loss of equity to the first sale, and $120,000 to the second. On that basis, and using the interest rates specified in Practice Note CM16, I would allow pre-judgment interest of $65,000.
This means that judgment should have been entered against Wealthsure and Mr Bertram in the sum of $1,716,680.
The outcome is the same in the case of the appeal by Mr Townley.
The consequence is that the appeals should be allowed, the judgment in favour of the first, second and sixth defendants be set aside and, in its place, judgment be entered against those defendants in the sum of $1,716,680. In all other respects, the appeals should be dismissed.
I would hear from the parties as to costs.
I certify that the preceding two hundred and sixty-seven (267) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate:
Dated: 30 May 2014
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