Limiting Liability under The Proportionate Liability Provisions

In the recent decision of the Supreme Court of Victoria of Sali & Anor v Metzke & Allen [2009] VSC 48 (19 February 2009), Justice Whelan considered the issue regarding the apportionment of liability under the Wrongs Act 1958 ("the Act").

Facts

• The Plaintiffs alleged that they suffered loss as a result of the failure of the company known as Universal Logistics (a company which went into liquidation) ("Universal"). The Plaintiffs were non-executive directors of Universal
• Blizzard was the executive director who resigned a week before Universal went into voluntary administration
• Metzke & Allan were the accountants of Universal and the Plaintiffs claimed that the losses were caused by breaches of contractual and other duties owed to them by Metzke & Allan
• Metzke & Allan joined Blizzard as a Third Defendant to the proceeding for the purposes that he was a concurrent wrongdoer under the Act and that Metzke & Allan's liability should be reduced as a result of his conduct in relation to the management of Universal
• No claim was made by the Plaintiff against Blizzard and Metzke & Allan were not permitted to make a claim against Blizzard - he was simply joined to the proceeding to reduce their liability (if any) owed to the Plaintiffs

Decision

• Justice Whelan found that the Plaintiffs had established negligence and a breach of retainer in two respects, being that:
  • Mr Allen failed to exercise reasonable skill and care by not considering and advising the Salis in relation to the financial result for the company for the year ending 30 June 1999 (but this had no relevant consequence); and
  • Mr Allen failed to exercise reasonable skill and care in that he delayed too long before taking steps which were necessary to obtain balance sheet information from the management of the company and this failure was a cause of part of the Plaintiff's loss.
• Justice Whelan found, among other things, that:
  • Blizzard, as managing director, had special skill and knowledge in relation to the subject matter of the profit reports which were eventually revealed to be false;
  • The profit reports were either deliberately false or were prepared in circumstances which must have involved negligence on your part;
  • Before a person can be a concurrent wrongdoer that person must be legally liable to the Plaintiff; and
  • Blizzard was found to be a concurrent wrongdoer and the Act required him to limit Metzke & Allan's liability accordingly.
• Therefore, Metzke & Allan's claim that their liability should be limited as a result of Blizzard's conduct was successful and they were found to have been liable for 30% only of the Plaintiffs' loss and damage in the sum of approximately $130,000.00.