In its recent decision in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd, the High Court considered whether the liability in negligence of a lender’s solicitor who failed to draft a mortgage to repay a fixed or stated amount could be proportionately reduced to reflect culpability also arising out of a borrower’s fraud.
The case is also significant in that it provided the High Court with its first opportunity to consider in detail the proportionate liability regime under the Civil Liability Act 2002 (NSW) (CLA).
At all levels of the proceedings, the key issues contended between the parties were:
A 3:2 majority of the High Court thought that these two questions should be answered in the affirmative.
The High Court’s decision confirms that proportionate liability will apply in a wide range of circumstances. It is anticipated that one of the many ramifications of the decision will be how assets are secured by lenders in the future, and how lenders’ solicitors advise and qualify their advice to lenders. The decision also provides additional guidance on the issues of causation and the application of the proportionate liability regime as set out in Pt 4 of the CLA.
As a consequence of the High Court’s decision, it would be prudent for lenders’ solicitors to ensure that they:
Click 'Download' to read the full article, which first appeared in LexisNexis Australian Banking & Finance Law Bulletin July 2013.
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