HCA: causation – concurrent & successive wrongdoers

Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 (3 April 2013)

I refer you to the judgment summary and the plurality of the court in relation to causation:

 43.

The proper identification of damage should usually point the way to the acts or omissions which were its cause. Causation is largely a question of fact, to be approached by applying common sense to the facts of the particular case[61]. This is not to deny that value judgments and policy have a part to play in causation analysis at common law[62] and, as has been observed[63], both factual causation and scope of liability elements are referred to in s 5D(1) of the Civil Liability Act.

44.

In March v Stramare (E & MH) Pty Ltd[64], it was observed that courts are no longer as constrained as they once were to find a single cause for a consequence and to adopt an “effective cause” formula. Courts today usually recognise that there may be wrongdoers whose acts or omissions occur successively, rather than simultaneously, and who may be liable for the same damage, even though one may be liable for only part of the damage for which the other is liable[65].

45.

The law’s recognition that concurrent and successive tortious acts may each be a cause of a plaintiff’s loss or damage is reflected in the proposition that a plaintiff must establish that his or her loss or damage is “caused or materially contributed to” by a defendant’s wrongful conduct[66]. It is enough for liability that a wrongdoer’s conduct be one cause[67]. The relevant enquiry is whether the particular contravention was a cause, in the sense that it materially contributed to the loss[68]. Material contribution has been said to require only that the act or omission of a wrongdoer play some part in contributing to the loss[69].

46.

There can be no doubt, on the findings of the primary judge, that Hunt & Hunt was a wrongdoer whose actions were a cause of Mitchell Morgan’s inability to recover the monies advanced. The question under s 34(2) of the Civil Liability Actis whether the fraudsters’ acts, independently of Hunt & Hunt, also caused that damage.

47.

The word “caused”, in a statutory provision in terms similar to s 34(2), has been read as connoting the legal liability of a wrongdoer to the plaintiff[70]. The language of liability is used in contribution legislation[71], but not in Pt 4 of the Civil Liability Act. Nevertheless, it would usually be the case that a person who is found to have caused another’s loss or damage is liable for it. References to the liability of a wrongdoer should not, however, distract attention from the essential nature of the enquiry at this point, which is one of fact.

48.

In determining the question of causation, it is necessary to keep clearly in mind the harm suffered by Mitchell Morgan: its inability to recover the monies advanced. Merely to then state the obvious facts – that the monies were advanced under the loan agreement and on the security of the mortgage – is to acknowledge that the harm suffered has more than one cause.

49.

Because Mitchell Morgan’s damage is its inability to recover monies, it is understandable that attention is focused upon the immediate consequence of Hunt & Hunt’s negligence, namely the mortgage’s inefficacy as security against the property, as causative of the damage. However, as Hunt & Hunt points out in its submissions, there were two conditions necessary for the mortgage to be completely ineffective: (a) that the loan agreement was void; and (b) that the mortgage document did not itself contain the debt covenant, but did so solely by reference to the loan agreement. Hunt & Hunt was responsible for (b), but the fraudsters were responsible for (a).

50.

It should not be overlooked that the effect of the fraudsters’ conduct was that Mitchell Morgan entered into the transaction and was left with an unenforceable loan agreement. Mitchell Morgan had no promise to repay upon which it could sue and it was unable, in a practical sense, to recover from the fraudsters when the fraud was discovered. The fraudsters’ conduct must therefore be seen as contributing to Mitchell Morgan’s inability to recover.

51.

More generally, it is plain that the fraudsters’ conduct induced Mitchell Morgan to enter into the transaction, of which the taking of a mortgage was a foreseeable element. The advance of the monies by Mitchell Morgan may have been made on the faith of an ineffective security, but Mitchell Morgan would never have had the need to take a mortgage, nor Hunt & Hunt to draw one, had Mitchell Morgan not been induced to enter into the transaction. The advance was also made on the faith of forged documents and the false certification of a solicitor. On any view, the fraudsters’ conduct in inducing Mitchell Morgan to enter into the transaction and pay the monies must be regarded as a material cause of the harm which resulted. The importance of the part the fraudsters’ conduct played is reflected in the extent to which the primary judge found them to be responsible for Mitchell Morgan’s loss[72].

52.

Giles JA found that Mitchell Morgan would not otherwise have paid the monies out but for the fraud and that it could have sued the fraudsters to recover the monies[73]. In the same passage, however, his Honour expressed the view that the forged loan agreement was merely “part of the occasion” for the loss, arising from the ineffective mortgage, to sound in damages. This view would appear to deny that the forged documents had any causative effect.

53.

Mitchell Morgan in its submissions interprets his Honour’s reasoning to be that the forged loan agreement did not cause the mortgage security to be ineffective. In this regard, Mitchell Morgan may be taken to be referring to Hunt & Hunt’s negligent drawing of the mortgage as unconnected with the situation the fraudsters had brought about. But as has already been pointed out[74], it is not a requirement of proportionate liability that the actions of one independent concurrent wrongdoer contribute to the negligence of another. The question is whether each of them, separately, materially contributed to the loss or damage suffered.

54.

It would appear that Giles JA was influenced to a view that the fraudsters’ conduct was not causative of the damage because he considered that Hunt & Hunt’s duty extended to protecting Mitchell Morgan from the fraud which occurred[75]. It may be doubtful that Hunt & Hunt’s duty is properly described in these terms. It was certainly to protect Mitchell Morgan’s economic interests and as such would require any security drawn to be effective[76], but this is so regardless of the reasons why monies advanced might not be recovered. Hunt & Hunt could not have foreseen that the documentation, certified as correct by another solicitor, was forged. In determining the extent of Hunt & Hunt’s duty, care must be taken not to deprive the fraudsters’ wrongdoing of any content.

55.

His Honour’s approach harks back to a preference for there to be an effective or sole cause; an approach which predated apportionment legislation generally[77]. It denies that wrongdoers’ acts may occur successively yet be a cause of the same damage. On this view, “but for” Hunt & Hunt’s negligence, loss would not have been suffered. But the same can be said “but for” the fraudsters’ conduct.

56.

In March v Stramare (E & MH) Pty Ltd[78], it was observed that certain commentators subdivided the issue of causation into two questions: causation in fact, to be determined by the “but for” test; and whether a defendant should be held responsible in law for the damage which his or her negligence played some part in producing. The approach was criticised. The “but for” test, although useful for some purposes, has its limitations. The approach placed too much weight on that test, to the exclusion of the common sense approach, which the law has always favoured[79].

57.

As to the second question, as has been observed above[80], it is accepted that value judgments and policy considerations have a part to play in determining whether an act is sufficient to bring about the harm suffered by a plaintiff[81]. Section 5D(1)(b) and (4) of the Civil Liability Act may be thought to involve such considerations, requiring the court to consider whether and why responsibility for the harm should be imposed on the negligent party. These considerations are necessary because a finding of causation invariably involves liability on the part of a defendant. Such a finding does not, however, involve a determination as to whether a defendant should bear sole responsibility or whether and to what extent it should be apportioned between other wrongdoers. If a finding of causation is made with respect to other wrongdoers, so that a defendant is a concurrent wrongdoer within the meaning of s 34(2), s 35(1) then requires the court to determine the extent of the defendant’s responsibility. The value judgments involved in that exercise differ from, and are more extensive than, those which inform the question of causation.

58.

So far as concerns Hunt & Hunt, it is clearly appropriate that its negligence be adjudged a cause and that it be held liable for Mitchell Morgan’s damage. However, it is not consistent with the policy of Pt 4 that Hunt & Hunt be held wholly responsible for the damage, when regard is had to the part played by the fraudsters’ conduct. Consistent with that policy, Mitchell Morgan should not recover from Hunt & Hunt any more than that for which Hunt & Hunt is responsible, as found by the primary judge.

 

Brisbane Barrister – David Cormack

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