Critical Change to Proportionate Liability – the High Court decision in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd & OrsAuthor : Catherine Osborne, Partner and Matthew Foglia, Special Counsel.

Financial Lines

On 3 April 2013 the High Court handed down its decision in the Vella case (Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10), providing some much needed guidance on the controversial issue of the proper application of the proportionate liability provisions of the Civil Liability Act 2002 (NSW) (CLA).

The issue remains somewhat controversial, however, with the High Court split 3 to 2.  The majority judgment by French CJ, Hayne and Kiefel JJ, overturns the 2011 decision of the full court of the NSW Court of Appeal, which had previously overturned the decision of Young CJ in the Supreme Court.

The case involved a claim by Mr Vella (the victim of a fraudster who obtained a loan secured by a forged mortgage over his property) against Mitchell Morgan Nominees (the lender who held the mortgage as security for the loan) seeking to void the loan and mortgage.  Mitchell Morgan, in turn, pursued a cross claim against its lawyers, Hunt & Hunt, for negligence in preparing the mortgage documentation.  Hunt & Hunt sought to limit its liability under the proportionate liability provisions of the CLA.  At first instance, the Supreme Court held that Hunt & Hunt and the fraudsters were concurrent wrongdoers and allocated 12.5% of the liability to Hunt & Hunt.

Mitchell Morgan, unable to collect the 87.5% allocation to the fraudsters (who were by then bankrupt) appealed, contending that the claim against Hunt & Hunt was not an apportionable claim and that Hunt & Hunt was liable for 100% of its loss.  The Court of Appeal allowed that appeal.

The majority of the High Court has now allowed Hunt & Hunt’s appeal and reinstated the primary judge’s decision limiting Hunt & Hunt’s liability to only its proportionate share of 12.5%.

This decision provides for a broad application of the proportionate liability provisions of the CLA and, as such, is likely to be good news to most insurers.

We attach a short case note on the decision.

For further information please contact:

catherine.osborne@wottonkearney.com.au

matthew.foglia@wottonkearney.com.au

03/04/2013