A duty to prevent a person from harming others? The latest from the High Court

On 12 November 2014 the High Court handed down judgment in Hunter and New England Local Health District v McKenna, unanimously allowing an appeal against an award of damages arising out of the deliberate killing of a man by his severely psychiatrically disturbed friend. While the Court's judgment only directly concerns the liability in tort of medical practitioners who exercise statutory functions relating to the involuntary hospitalisation of psychiatric patients, it is likely to have significant implications for statutory bodies charged with the exercise of public functions.

The Facts

Early in the morning of 20 July 2004, Mr Stephen Rose became concerned about the mental state of his friend Mr Phillip Pettigrove, who suffered from schizophrenia. Mr Rose took Mr Pettigrove to Manning Base Hospital in Taree. Upon his arrival at the hospital, Mr Pettigrove was admitted as an involuntary patient under the former Mental Health Act 1990 (NSW).

During the afternoon of 20 July 2004, hospital staff examined Mr Pettigrove and discussed his condition with Mr Rose. It was determined that Mr Pettigrove would be discharged into the care of Mr Rose, who would take him by car to his mother's home in Echuca. On the morning of 21 July 2004, Mr Pettigrove and Mr Rose departed Taree for Echuca. That night, while in a delusional state, Mr Pettigrove strangled Mr Rose to death.

Mr Rose's mother and his two sisters alleged that they had sustained psychiatric injury as a result of Mr Rose's death and commenced proceedings for damages against the hospital authority. They alleged that hospital staff had been negligent in failing to order the continued involuntary treatment of Mr Pettigrove and that this negligence had been a cause of Mr Rose's death and of their subsequent psychiatric injuries. At trial, the plaintiffs were unsuccessful. However, they successfully appealed to the New South Wales Court of Appeal. The hospital authority then appealed to the High Court.

The NSW Act

Central to the case were the provisions of the NSW Act. Section 21 provided for the involuntary detention of a person in a hospital if a medical practitioner certified that he or she was mentally ill. However, the Act contained numerous safeguards to protect the rights of patients. In particular, it provided that a decision to involuntarily admit a patient was subject to multiple stages of internal review by specialist medical practitioners and that the involuntary admission of a patient pursuant to the order of a medical practitioner could not exceed three days' duration. Thus the Act manifested a strong bias against involuntary detention. This policy was reflected in the express terms of section 20 of the Act, which provided that involuntary admission was not to be ordered where a less restrictive treatment option was reasonably available.

Judgment

The High Court held that staff at the hospital owed no duty to take reasonable care in determining whether or not to order the continued involuntary treatment of Mr Pettigrove. The Court considered that this conclusion was mandated by the express terms of s 20 of the NSW Act and by other provisions which 'reinforced' the policy enunciated in s 20. The Court determined that to impose upon hospital staff a common law duty to take reasonable care in determining whether to order the continued involuntary treatment of Mr Pettigrove would be inconsistent with the strong presumption against involuntary treatment manifested in the Act.

Implications for Decision Makers

While the judgment of the Court directly concerns only the specific provisions of the (now repealed) NSW Act, it will be welcomed by parole boards, quarantine authorities and other decision makers whose powers require them to balance the interests of individuals against the interests of the wider community. The imposition of a duty to take reasonable care in the exercise of such powers has the potential to act as a potent incentive to a decision maker to make the decision that he or she considers least likely to result in an award of damages, rather than the one he or she considers to be correct or preferable. It thus may place a decision maker in an impossible situation in which the proper performance of a statutory function carries with it a risk of incurring liability in damages, while minimising the risk of liability entails neglecting the performance of a statutory duty. The judgment of the High Court contributes to a body of authority, which includes such cases as Sullivan v Moody, Regent Holdings v State of Victoria and X v State of South Australia, that holds that a duty of care will not be found to exist in such circumstances.

If you are in the Victorian Government and would like further guidance on decision-making, risk and liability, we can help.

Jonathan Bayly
t 8684 0223
jonathan.bayly@vgso.vic.gov.au

Deep pockets to no longer cop it

Governments around Australia introduced proportionate liability legislation in the early 2000s to help cut the price of insurance.  They intended to prevent ‘deep pocket’ defendants being held entirely liable for losses to which others contributed.  Yet judges have since interpreted the legislation to allow maximum recovery to plaintiffs.

The High Court has recently handed down a decision that restores the original aims of the proportionate liability regime.  It is good news for a ‘deep pocket’ defendant like the government, as its liability (in a non-personal injury action) is likely to be limited to that for which it is actually responsible, as was always intended by the legislation. 

The decision is Hunt & Hunt v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10. 

Facts

Mitchell Morgan was a lender. Hunt & Hunt were their lawyers. They had prepared a mortgage instrument for a loan from Mitchell Morgan to a Mr Vella and a Mr Caradonna.  The instrument was registered against property owned by Mr Vella alone. Unbeknownst to either the lender or the lawyers, Mr Caradonna had forged Mr Vella's signature on the loan documents and on the mortgage instrument.  Mr Caradonna spent the loaned money and then become bankrupt.

Mitchell Morgan therefore could not recover the money from Mr Caradonna.  Nor could it recover from Mr Vella, as the mortgage instrument was void because of the forgery.  So it turned to Hunt & Hunt…

Trial history

The NSW Supreme Court held that Hunt & Hunt had been negligent in preparing the mortgage instrument. Hunt & Hunt did not appeal this finding.  The issue for the High Court was whether the proportionate liability provisions applied, limiting Hunt & Hunt’s liability to a percentage of the total loss that reflected their culpability.

Justice Young of the Supreme Court had found they did and apportioned only 12.5% of the liability to Hunt & Hunt.  But the Court of Appeal found the provisions did not apply, as the loss caused by Mr Caradonna was different to the loss caused by Hunt & Hunt.  It found that Mitchell Morgan was therefore entitled to recover 100% of its damages from Hunt & Hunt.

High Court

A 3:2 majority of the High Court agreed with the trial judge, finding that the proportionate liability regime under Part 4 of the NSW Civil Liability Act 2002 (which is in all material respects identical to Part IVAA of the Victorian Wrongs Act 1958) applied. 

The Court found that the distinct wrongs committed by Mr Caradonna and by Hunt & Hunt had caused a single economic loss for Mitchell Morgan, being its inability to recover the money lent to Mr Caradonna.  Mr Caradonna and Hunt & Hunt were therefore concurrent wrongdoers, bringing the NSW proportionate liability provisions into play.

The Court clarified that ‘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’. 

In other words, it was enough that Mr Caradonna and Hunt & Hunt had both contributed to Mitchell Morgan’s loss, broadly described as its inability to recover the money that it had advanced.

Implications

This decision will be of significance to solicitors, insurance brokers, valuers, accountants and other professionals whose calling requires them to protect clients from the economic consequences of wrongs committed by others.  Proportionate liability will likely now reduce these professionals’ exposure in many cases.

However, it is important that any government body in negligence proceedings (other than personal injury) identify all possible concurrent wrongdoers. This now includes any person who materially contributed to the loss. It does not matter that each concurrent wrongdoer may have caused the loss in a different way or even that one of the wrongdoers acted fraudulently.

For example, this decision could apply in property damage or economic loss cases that name an emergency service provider as a defendant (assuming a duty of care was owed, which would depend on the circumstances). If a fire fighting authority negligently failed to stop a chemical leak caused by a third party, this decision suggests that the fire fighting authority and the third party would be concurrent wrongdoers.   This means that the fire fighting authority would only have to pay a portion of the total damages, rather than the full amount.  As such, this decision may prove to be good news for emergency service providers in certain classes of proceedings for damages. 

What do you think about this development? Will it achieve the goals of the proportionate liability regime?

For more information on this decision or for advice on your dispute resolution strategy, please contact:

Jon Bayly
Principal Solicitor
t  8684 0223 
jonathan.bayly@vgso.vic.gov.au