A successful appeal in the High Court by former clients of WealthSure will assist plaintiffs in class actions against financial services firms, says law firm King & Wood Mallesons.
The High Court of Australia has allowed an appeal against a May 2014 decision of the Federal Court that apportioned liability for losses suffered by Ronald and Janna Selig following advice given by a WealthSure adviser.
According to the High Court judgement in Selig v Wealthsure, Mr and Mrs Selig invested in Neovest Limited on the advice of WealthSure authorised representative David Bertram and suffered “consequential losses” when Neovest (effectively a ‘Ponzi scheme’) became insolvent.
On 30 May 2014, the Federal Court found that the losses – while not ordinarily apportionable under section 1041E of the Corporations Act 2001 (relating to false and misleading statements) – were apportionable in this case because the damages arose from breaches of section 1041H (misleading or deceptive conduct).
The Federal Court ordered that the financial advisers (WealthSure) pay 60 per cent of the damages, Mr Norton (a promoter of Neovest) pay 25 per cent, and Mr Townley, one of the directors of Neovest, pay 15 per cent.
However, a similar 2014 case ABN Amro Bank NV v Bathurst Regional Council created confusion in the financial services industry when the Federal Court found the defendant was solely liable for losses suffered.
The High Court provided some clarity this week when it ruled that claims based on breaches of section 1041E are not apportionable.
The judgement in Selig v Wealthsure Pty Ltd  HCA 18 (13 May 2015) effectively moves back to WealthSure 100 per cent of the liability for the $1.7 million in damages due to the Seligs.
King & Wood Mallesons partner Roger Forbes said that as a result of the decision, plaintiffs are likely to continue the practice of pleading multiple claims.
“[Plaintiffs will be able to act] safe in the knowledge that while the statutory apportionment and contributory negligence defences are applicable ... to establish statutory misleading or deceptive conduct claims, those defences will not ‘infect’ parallel statutory claims, even where the same loss is alleged,” Mr Forbes said.
“Accordingly, the apportionment and contributory negligence defences will be practically irrelevant unless the plaintiff succeeds only on their misleading or deceptive conduct or common law negligence claim."
The losers will be defendants in commercial litigation in Australia generally, Mr Forbes said.
“In particular, financial services providers and others with exposure to statutory liability for false or misleading statements in relation to financial services or products [will be affected],” he added.
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