Macpherson Kelley’s client, Tesseract, was retained by Pascale to prepare a structural engineering design for a South Australia warehouse, but the two companies were referred to arbitration when a dispute arose over alleged contract breaches.

Tesseract’s claim that other parties, referred to as concurrent wrongdoers, were responsible for the alleged loss was originally knocked back by the South Australian Court of Appeal.

The appeal court relied on a determination that the plaintiff will have the opportunity to join wrongdoers in one set of proceedings, and the inability to join all wrongdoers to an arbitration except by consent.

Santilli said the successful appeal in the High Court represents a “significant shift, in as much as the widely held view was that proportionate liability only applied to claims heard in a court”.

On appeal, the High Court bench emphasised the inability to join wrongdoers in arbitration does not preclude the application of proportionate liability laws and that the core principles of these laws can still be upheld within arbitration frameworks.

The bench’s decision aligns with the statutory purpose of proportionate liability regimes and clarified that arbitration proceedings must incorporate the proportionate liability principles to ensure consistency with the statutory frameworks.

“Moving forward, this landmark decision will influence the way in which practitioners conduct arbitration on behalf of their clients, where the arbitration involves a claim for economic loss by reason of a failure to exercise reasonable care and/or misleading and deceptive conduct,” Santilli explained.

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Santilli added a respondent may be able to “defray its exposure” by alleging there are concurrent wrongdoers whose conduct it believes also “caused the loss and damage alleged”.

Further, parties should seek legal advice on alternative dispute resolution provisions or arbitration clauses.

Santilli said it is also “imperative” that parties are “carefully considering” the proposed clauses the subject of a draft contract.

“It is not only important for practitioners to advise their clients on the clauses being negotiated in new contracts, it is also extremely important for practitioners to service their current clients who have existing contracts, which include arbitration clauses.

“The best course would be for practitioners to advise their clients on their contractual arrangements to ascertain what, if any, risks are exposed to, and consider what, if any, steps can be taken to mitigate such risks,” Santilli said.