Joinder of defendants in apportionable claims: a question of justice

A recent Western Australian Court of Appeal case demonstrates the circumstances in which a court will join a prospective defendant in an apportionable claim.

In Hart v JGC Accounting & Financial Services Pty Ltd [2015] WASCA 22, Nikola Fudlovski, Rosemary Fudlovski, Fudlovski Investments Pty Ltd and Bluechip Enterprises Pty Ltd (collectively ‘the plaintiffs’) sued JGC Accounting & Financial Services Pty Ltd and Justin Coppin (collectively ‘JGC’) in relation to the provision of financial advice.

In their statement of claim, the plaintiffs alleged that Nigel Hart recommended that they invest in certain companies. Following Mr Hart’s recommendations, the plaintiffs instructed JGC to provide advice on the proposed investments. JGC advised the plaintiffs to undertake the investments, which they then did. The investments performed poorly and the plaintiffs suffered loss and damage.  The plaintiffs did not bring a claim against Mr Hart.

JGC commenced third party proceedings against Mr Hart and claimed contribution or indemnity arising out of s7 of the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA). Mr Hart opposed these proceedings on the basis that the principles of proportionate liability under the Civil Liability Act 2002 (WA) precluded a claim for contribution. The primary judge agreed with Mr Hart’s submission, but expressed concern that there was unsatisfactory forensic implications arising in circumstances where Mr Hart was not a party to the action. These were that:

  • Mr Hart was not able to contest adverse findings being made against him;
  • the plaintiffs may be disadvantaged in resisting claims by JGC that Mr Hart was a concurrent wrongdoer; and
  • there was a risk of inconsistent findings if the plaintiffs subsequently commenced separate proceedings against Mr Hart.

As a result, JGC applied to issue a counterclaim against the plaintiffs and simultaneously join Mr Hart as an additional defendant to the counterclaim. The relief sought in the counterclaim included a declaration as to the respective proportion of any damage or loss caused by each party. The primary judge granted JGC’s application and ordered the joinder of Mr Hart.

Mr Hart appealed this decision to the Court of Appeal citing a number of errors of fact and law. The plaintiffs also appealed the decision.

On appeal, the Court of Appeal analysed the legislative provisions governing proportionate liability and joinder, which are contained in Part 1F of the Civil Liability Act.

As this was a claim for pure economic loss, it was an apportionable claim within s5AI of the Civil Liability Act.  This meant that liability could be apportioned between defendants and was not joint or several.

The court has a discretion under s5AN(1) of the Civil Liability Act to join defendants in apportionable claims.  In considering whether to exercise this discretion the Court of Appeal considered that it should be mindful of the following (non-exhaustive) factors:

  • the administration of justice, such as whether a concurrent wrongdoer is given an opportunity to be heard in relation to adverse findings on questions of responsibility for loss;
  • the likelihood and extent to which the joinder would add complexity and delay to the litigation;
  • the attitude of the plaintiff to the proposed joinder; and
  • the prospect of multiplicity of suits with the potential for inconsistent findings (if the joinder were not ordered).

Ultimately, the question is whether, on the evidence before the court and having regard to the issues in the litigation, and bearing in mind the statutory scheme of Part 1F as a whole, it is in the interest of justice to grant leave to join a defendant under s5AN(1).

In assessing whether to exercise the court’s discretion to grant declaratory relief and join Mr Hart, the Court of Appeal made the following observations:

  • While JGC had an interest in providing the existence and extent of any liability in Mr Hart to the plaintiffs, it did not have a pecuniary claim against Mr Hart.
  • JGC also did not have a proper claim for declaratory relief against the plaintiffs or Mr Hart because a bare declaration of the extent of Mr Hart’s liability to the plaintiff would be abstract and hypothetical (in the absence of a pecuniary claim) and would have no legal significance.

As a result, the Court of Appeal dismissed JGC’s application for joinder but ordered that the plaintiffs undertake formally to not bring subsequent proceedings against Mr Hart. This removed any prospect of multiplicity of suits and conflicting judgments.

Note that the position would be different in Victoria, where the proportionate liability provisions in the Wrongs Act 1958 (VIC) together with superior court authority allow for a declaration against a concurrent wrongdoer. The issue would never arise in Queensland, where the Civil Liability Act 2003 (QLD) requires a plaintiff to bring a claim against all persons against whom the plaintiff has reasonable grounds to believe may be liable for the loss or damage.

When defending apportionable claims, defendants should be mindful that although joining a concurrent wrongdoer may seem attractive so as to crystallise proportionate liability, a court will not exercise its discretion to effect the joinder where it is not in the interests of justice to do so. This particularly the case where a plaintiff has declined to commence proceedings against a prospective defendant who is impecunious (but would otherwise be liable to contribute to a claim).

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