Apportioned loss does not mean apportioned costs

Having previously found the defendants liable for contravening s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth), the NSW Supreme Court was tasked with determining apportionment of the plaintiffs’ loss as between the respective defendants. The Court declined to apportion costs, finding that the defendants should be jointly and severally liable for same.

In issue

• Whether the plaintiff’s loss should be apportioned between the respective defendants, including a company and its director, and whether the defendants should be jointly and severally liable for the plaintiffs’ costs or whether costs should be apportioned.

The background

The substantive proceedings concerned an investment made by the plaintiffs, Mr Jianping Qiu and his wife, Ms Jingjing Lin, in the Jarrah Capital 2005 Loan Trust (Jarrah Capital Trust).

The plaintiffs alleged that the three named defendants engaged in misleading and deceptive conduct, whereby:

• the first defendant, Mr Yuchen Chen (Mr Chen), who introduced the plaintiffs to the investment in the Jarrah Capital Trust, made false oral representations in relation to the investment and later provided the Jarrah Capital Information Memorandum (Jarrah Capital IM) to the plaintiffs
• the second defendant, Jarrah Capital 2005 Loan Pty Ltd (Jarrah Capital), in its capacity as trustee of the Jarrah Capital Trust, breached its duties as trustee and engaged in misleading conduct, and
• the third defendant, Mr Michael Hai Tao Pan (Mr Pan), who was a director and the Chief Executive Officer of Jarrah Capital, knowingly assisted in Jarrah Capital's misleading conduct.

In the primary judgment¹, Nixon J found that all three defendants had engaged in misleading conduct in contravention of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), causing the plaintiffs loss and damage in the total amount of $1,000,000.

Two questions thereby remained to be determined by the NSW Supreme Court:

1. whether the plaintiffs’ loss should be apportioned between the defendants and if so, in what manner, and
2. whether the defendants should be jointly and severally liable for the plaintiffs’ costs, or whether liability for costs should also be apportioned between them.

The decision at trial

Apportionment generally

In reliance upon s 12GR(1) of the ASIC Act, the Court noted it was common ground that the plaintiffs’ claims against each of the defendants for the loss suffered by their respective contraventions of s 12DA(1) of the ASIC Act were apportionable claims.

Noting that s 12GR(1) of the ASIC Act directs attention to the extent of each concurrent wrongdoer’s 'responsibility' for the plaintiff’s loss, the Court referred to Reinhold v New South Wales Lotteries Corporation (No 2) (2008) 82 NSWLR 762, wherein the Court explained that the determinants of 'responsibility' are blameworthiness and causal potency. The Court considered various other authorities on this issue, including Vinidex v Theiss [2000] NSWCA 67, in which case Rolfe AJA confirmed that when determining apportionment, a Court must '…have regard to what is just and equitable and, in doing so, it must make a comparison of the culpability and of the acts of the parties causing damage and, thus, to the relative blameworthiness and the relevant causal potency of the negligence of each party…'

Apportionment as between Jarrah Capital and Mr Pan

At all material times, Mr Pan was the sole director and the Chief Executive Officer of Jarrah Capital. Having previously determined that Jarrah Capital provided the Jarrah Capital IM to Mr Chen at Mr Pan’s direction, the Court held that the knowledge of Mr Pan was the knowledge of Jarrah Capital. As such, the liability of Jarrah Capital for contravention of s 12DA(1) of the ASIC Act arose from the acts or omissions of Mr Pan.

Consequently, the Court rejected the contention of Mr Pan and Jarrah Capital that loss could be apportioned between them, concluding that they were not 'concurrent wrongdoers'. That is, Mr Pan and Jarrah Capital’s wrongdoing were not independent of each other; they could be regarded at law as one and the same act.

Apportionment as between Mr Chen and Jarrah Capital/Mr Pan

In determining apportionment as between Mr Chen and Jarrah Capital/Mr Pan, the Court engaged in a comparison of the parties’ respective culpability and causal potency, including that:

• Mr Pan provided Mr Chen with information regarding the investment and Mr Chen did not have any understanding as to either the nature of the arrangements that were in place, or how the arrangement provided security for the Jarrah Capital Trust. Mr Chen believed that the investment was safe because it was promoted by Mr Pan.
• When Mr Chen made misleading oral representations to the plaintiffs, he was not aware that those representations were false, nor was he reckless or careless as to whether they were false or not. It was not established that Mr Chen was aware that the information contained in the Jarrah Capital IM was false.
• Jarrah Capital and Mr Pan were aware of the contents of the Jarrah Capital IM and were aware that it conveyed representations that were false. Indeed, Mr Pan created the Jarrah Capital IM, removing references to important information in the knowledge that the document therefore provided inaccurate information to investors. Jarrah Capital subsequently provided the Jarrah Capital IM to Mr Chen, at Mr Pan’s direction, without any caveats or warnings as to its inaccurate contents.
• While the oral representations made by Mr Chen had causative effect, Mr Qiu paid particular attention to the written representations contained in the Jarrah Capital IM, which was created by Jarrah Capital and Mr Pan.

The Court ultimately concluded that Jarrah Capital and Mr Pan’s culpability was significantly greater than that of Mr Chen and similarly, their conduct had greater causal potency. The plaintiff’s loss was apportioned accordingly:

• Mr Chen – as to 20% and
• Jarrah Capital and Mr Pan – jointly and severally, as to 80%.

Joint liability for costs

The Court noted that as a general rule, when a plaintiff succeeds against multiple defendants, those defendants are jointly and severally liable for the plaintiff’s costs.

Albeit accepting the general rule, Mr Chen submitted that an apportionment of costs was within the Court’s discretion.

The Court declined to apportion costs between the defendants, finding that this was not a case where the claims against the respective defendants involved distinct legal or factual issues, but was rather one arising from a common substratum of facts. The plaintiffs were therefore required to establish many of the same matters with respect to their claim against each defendant. Accordingly, the Court ordered the defendants to be jointly and severally liable for the plaintiffs’ costs.

Implications for you

As can be seen in this case, there are significant costs considerations that parties ought to contemplate when embroiled in multi-party litigation. Whilst a defendant’s liability for a plaintiff’s loss may be limited to an extent, it may not necessarily follow that costs would be limited to the same extent, and the defendant may in fact, practically 'be left holding the purse'. Particularly in circumstances where a defendant may envisage a minor role in such litigation, the liability to pay a plaintiff’s costs could easily eclipse that of a liability to compensate the plaintiff’s loss.

In those circumstances, there is substantial benefit for a defendant to consider costs protection measures such as Calderbank offers or offers of compromise, and otherwise, generally to seek an early exit out of expensive and protracted multi-party litigation.

Jianping Qiu v Yuchen Chen (No 3) [2026] NSWSC 1037

¹ Jianping Qiu v Yuchen Chen (No 2) [2026] NSWSC 899.