Hunt & Hunt Lawyers V Mitchell Morgan Nominees

The High Court of Australia handed down its decision in relation to Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10

Some members of the API may recall the judgement of Mitchell Morgan Nominees Pty Limited v Vella [2011] NSWCA 390, which was covered in the Legal Notebook section of the March 2012 edition (pages 352 to 354) of the Australia and New Zealand Property Journal.

That judgement provided some support for the proposition that in certain circumstances, specific individuals in a lending transaction may not be concurrent wrongdoers.

We can now report that on 3 April, 2013 the High Court of Australia handed down its decision in relation to the appeal of the above judgement: Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10.

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 who negligently prepared certain mortgage documentation, was found to be entitled to receive the benefit of certain proportionate liability legislation. Therefore, Hunt & Hunt was held to be responsible for only 12.5% of the loss and not 100%, which would have been the case if the relevant proportionate liability provisions did not apply.

The majority of the High Court took a broad approach to the interpretation of what constitutes a “concurrent wrongdoer” for the purpose of proportionate liability provisions under the Civil Liability Act 2002 (NSW) (CLA).

Indeed, the High Court gave weight to the purpose and intent of the proportionate liability scheme and referred to placing limits on personal responsibility. The decision is also a pleasing result for insurers, with the Court appearing to acknowledge that whilst professional people are often insured against liability to clients, they often end up the sole target of legal action when losses are suffered, despite the involvement of others.

Put simply, whilst specific to its facts, the High Court’s decision is good news for valuers and other professionals, such as solicitors, involved in lending transactions. The majority judgement demonstrates that when the independent wrongdoing of various parties induces a lender to enter into a loan transaction and advance funds:

• the loss of those funds can be regarded as the harm that has resulted from such conduct
• such conduct by the various third parties may be considered concurrent wrongdoing

By way of example, assume that a lender lends money to a borrower secured by a mortgage over the security property. The loan is made in reliance upon:

• a valuation by a negligent valuer
• misrepresentations from the borrower
• misrepresentations from a broker
• negligent advice from the lender's solicitor

In such a case, a Court may find that the borrower, the broker and the lender’s solicitor are concurrent wrongdoers in the lender’s claim against the valuer. Assuming that the borrower, the broker, the lender’s solicitor and the valuer are found equally responsible, this may result in the valuer being responsible for one quarter of the lender’s damage or loss, rather than 100%.

However, practitioners, especially those in the areas of valuers’ and/or solicitors’ liability, still need to apply significant forensic attention when advising their clients and pleading proportionate liability. Not only are there technical differences between different jurisdictions – as the saying goes – each case will rise and fall on its own facts.

A more detailed analysis of this judgment will appear in the June 2013 edition of the Australia and New Zealand Property Journal.

Read more here.