In brief - For misleading and deceptive conduct claims, causation and relative culpability of each concurrent wrongdoer are central to question of apportionment
This update considers the New South Wales Court of Appeal decision in Skinner v Redmond Family Holdings Pty Ltd  NSWCA 329
. Importantly, the appeal decision affirms that the question of apportionment (in the context of misleading and deceptive claims under the Corporations Act) is a matter of discretion, having regard to causation and relative culpability of each concurrent wrongdoer.
Supreme Court apportions damages equally between two directors found guilty of misleading and deceptive conduct
This appeal decision should be viewed in the context of its procedural history.
In the judgment of Redmond Family Holdings v GC Access Pty Ltd & Ors  NSWSC 796
, the plaintiff established a claim of misleading and deceptive conduct, under the Corporations Act, against two defendant directors. The claim against those directors related to the non-disclosure of loans owed by companies (which the plaintiff acquired shares in) to entities associated with those directors. The loans had the ability to be converted into equity at the directors' discretion.
The subsequent judgment of Redmond Family Holdings v GC Access Pty Ltd & Ors  NSWSC 1883
considered the question of damages. The plaintiff proposed that judgment be made against the directors in the amount of $900,000. One of the directors, however, sought to apportion liability under Part 7.10 Division 2A of the Corporations Act
(which deals with proportionate liability for claims of misleading and deceptive conduct) and argued that sole liability should be borne by the other director.
The Court concluded that damages should be apportioned equally between each of the directors, on the basis that it was:
- just and equitable to apportion liability equally where each director would otherwise bear the risk of being held liable for the entire liability, including on the insolvency of the other; and
- not just and equitable, having regard to each director's common responsibility for the plaintiff's loss, to apportion a lesser share of that liability to one director over another, where each of them could, by disclosure, have avoided the plaintiff's exposure to that loss.
Having regard to these considerations, the Court found that the conduct of each director involved misleading and deceptive conduct in relation to a financial product or a financial service in contravention of section 1041H
of the Corporations Act
and under section 1041H, assessed damages in the sum of $900,000.
Issues on appeal include Court's finding that it was just to apportion liability equally between directors
One of the primary issues on appeal was in respect of the apportionment of liability between the two directors. In particular, one director submitted that the Court erred in finding, for the purpose of section 1041N
of the Corporations Act
, that it was just for that director to be held 50% liable for the plaintiff's loss on the basis that the roles between each director were entirely different.
Apportionment and apportionable claims under the Corporations Act
In considering this ground of appeal, the Court had regard to the underlying principles of apportionment. In particular, the Court reaffirmed (at ) that Division 2A of Part 7.10 of the Corporations Act
provides for a defence of proportionate liability with respect to an "apportionable claim", where a claim for damages is made under section 1041I(4)
, for economic loss or property damage caused by conduct that was done in contravention of section 1041H (misleading or deceptive conduct).
In any proceedings involving an "apportionable claim", under the Corporations Act, 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 (see section 1041N).
Who is a "concurrent wrongdoer"?
The Court then considered the term "concurrent wrongdoer" and confirmed that a "concurrent wrongdoer" 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. It does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.
The Court considered the High Court decision in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd and Ors (2012) 247 CLR 613, where the plurality noted that the definition of "concurrent wrongdoer" raises the following two questions:
- What is the damage or loss that is the subject of the claim?
- Is there a person, other than the defendant, whose acts or omissions also caused that damage or loss?
The scope of those questions was analysed in the context of the corresponding provisions within the Civil Liability Act 2002 (NSW) (See Part 4 which deals with proportionate liability).
The Court also noted that a wrongdoer's act may be independent of those of another wrongdoer yet cause the same damage.
How will a court apportion responsibility?
The task of apportionment was explained in the decision of Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492, where the majority stated that a question of apportionment is a question of proportion, balance and relative emphasis, and the weighing of different considerations. Necessarily, this will involve judicial discretion, to which there may be differences in opinion.
Having said that, the task of apportionment involves a comparison of both culpability (the degree of departure from the standard of care of the reasonable man) and of the relative importance of the acts of the parties in causing the damage.
Directors' equal liability finding upheld by Court of Appeal
The Court of Appeal stated (at ) that the "assessment of comparative responsibility between [the two directors] when determining just apportionment under Corporations Act, s 1041N required a broad discretionary evaluation of the conduct of each wrongdoer in terms of both causation and relative culpability."
The Court of Appeal found no error in the primary judge's reasoning that:
- each director knew that there had been non-disclosure in their respective dealings with the plaintiff;
- irrespective of whether either of them knew what the other may have conveyed to the plaintiff, each director, by disclosure, could have avoided the plaintiff's exposure to loss; and
- because of those circumstances, each director would otherwise bear the risk of being liable for the plaintiff's entire liability.
The Court of Appeal upheld the apportionment of 50/50 between each director.
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