Proportionate liability: Vella decision overturned by Australian High Court

HUNT & HUNT LAWYERS V MITCHELL MORGAN NOMINEES PTY LTD & ORS

SNAPSHOT

On 3 April 2013, the High Court of Australia handed down its decision in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd1 . The decision related to an appeal by Hunt & Hunt Lawyers (Hunt & Hunt) from the judgment of the New South Wales Court of Appeal in Mitchell Morgan Nominees Pty Ltd & Anor v Vella & Ors [2011] NSWCA 390.

A key issue in the judgment was the interpretation of several key proportionate liability provisions in the Civil Liability Act 2002 (NSW) (CLA) and equivalent provisions in other Australian jurisdictions.

To determine whether Hunt & Hunt was a concurrent wrongdoer, the court had regard to two questions:

What was the loss which was the subject of the claim (the starting point for this analysis being identification of the interest infringed by the negligent act)? Secondly, whether there was a person, other than Hunt & Hunt, whose act(s) or omission(s) also caused the loss or damage. By a narrow 3:2 majority, the High Court overturned the decision of the New South Wales Court of Appeal and reinstated the primary judge's conclusion apportioning loss between the concurrent wrongdoers. The practical effect was that Hunt & Hunt (a firm of lawyers which negligently prepared the mortgage documentation) was held to be a concurrent wrongdoer together with each of the two "fraudsters" in the case. Therefore, Hunt & Hunt was held to be responsible for only 12.5% of the loss and not 100% (which would be the case if the proportionate liability provisions under the CLA did not to apply).

In a majority judgment, the High Court has taken a broad approach to the interpretation of what constitutes a "concurrent wrongdoer" for the purpose of proportionate liability provisions under the CLA. Whilst specific to its facts, the decision should nonetheless provide some comfort to those seeking to rely on proportionate liability regimes in Australia.

This decision focuses attention upon the proper identification of the "damage or loss" as the harm to a plaintiff's economic interest rather than the underlying potential myriad of causes of the "damage or loss." This distinction is welcome news to defendants who had been subjected to an overly technical analysis of underlying facts and narrow characterisation of "loss or damage" under the Court of Appeal's reasoning.

The High Court's decision gives effect to the purpose of Part 4 of the CLA to give effect to a legislative policy that, in relation to certain claims such as those for economic loss or property damage, a defendant should be liable only to the extent of his or her responsibility.

BACKGROUND

Facts

Allessio Vella and Angelo Caradonna were involved in a joint venture relating to a boxing event. As a result of this relationship, Mr Caradonna fraudulently obtained possession of certificates of title to properties owned by Mr Vella. Unbeknownst to Mr Vella yet with the assistance of Mr Caradonna's solicitor, Lorenzo Flammia, Mr Caradonna applied for mortgage finance in Mr Vella's name to, amongst others, Mitchell Morgan Nominees Pty Ltd (Mitchell Morgan).

Mr Flammia made misrepresentations to Mitchell Morgan's solicitors, Hunt & Hunt, that he had witnessed the relevant documents provided in support of the mortgage application. The mortgage was approved and registered. Mitchell Morgan paid over $1 million into Mr Caradonna and Mr Vella's joint account. Mr...