Canada: Australian Fraudsters: Definition Of Concurrent Wrongdoer Tied To Loss

Last Updated: May 16 2013
Article by Kate Findlay

Most Read Contributor in Canada, September 2018

When is a fraudulent and negligent tortfeasor a "concurrent wrongdoer"? In Hunt & Hunt Lawyers v. Mitchell Morgan Nominees, the High Court of Australia has clarified the definition of a concurrent wrongdoer finding that liability can be apportioned under Part 4 of the Civil Liability Act where the damage caused by one or more concurrent wrongdoers is the same. The reasoning behind the apportionment of loss made by the court is instructive on the meaning of concurrent wrongdoing with potential application to other common law regimes.

Background

Angelo Caradonna and Alessio Vella entered into a business venture and together opened a joint bank account taking possession of shares of three properties. Mr. Vella obtained possession of the certificates of title and forged Mr. Caradonna's signature to obtain a mortgage from Mitchell Morgan. The forgery was certified by Mr. Flammia, Mr. Caradonna's cousin and solicitor (Mr. Flammia and Mr. Caradonna are defined collectively by the Court as the "fraudsters"). Hunt & Hunt Lawyers ("Hunt & Hunt") acted as Mitchell Morgan's solicitor on the transaction. Subsequently, Mitchell Morgan advanced $1,000,748.85 to the account of Mr. Caradonna & Mr. Vella, which was withdrawn by Mr. Caradonna alone. At the time the proceedings were instituted, the fraudsters were bankrupt.

Australia's Civil Liability Act is distinct from the concurrent liability regime that exists in Canada's common law provinces. For example, Section 1 of Ontario's Negligence Act states that concurrent tortfeasors are jointly and severally liable to the plaintiff. The legislative regimes that exist in each of Canada's other common law provinces similarly hold concurrent tortfeasors to be jointly and severally liable. In contrast, Section 35(1) in Part 4 of the CLA limits a defendant's liability to a successful plaintiff to the defendant's proportionate liability, as determined by the court. Under Section 34(2), a "concurrent wrongdoer" is defined as "a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim".

At first instance, Young CJ in Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 held that the fraudsters and Hunt & Hunt were together concurrent tortfeasors under Part 4 of the CLA, the latter for breaching the duty of care owed to Mitchell Morgan by failing to include a covenant to repay a stated amount when preparing the mortgage documents. Mitchell Morgan's claim against Hunt & Hunt was found to be an apportionable claim limited to 12.5% of Mitchell Morgan's loss.

The New South Wales Court of Appeal overturned Young CJ's decision in Mitchell Morgan Nominees Pty Ltd v. Vella [2011] NSWCA 390, holding that the fraudsters and Hunt & Hunt were not concurrent wrongdoers. While the fraudsters were found to have caused Mitchell Morgan to advance loan funds, Hunt & Hunt was found to have denied Mitchell Morgan the benefit of security for the money paid out. The damage caused by Hunt & Hunt was found to be distinct from that caused by the fraudsters.

The Decision

In its decision, the High Court focused its analysis on two questions:

  1. What is the damage or loss?
  2. Did the acts of any person, other than the defendant, cause the damage or loss?

The court found that the damage forming the subject of a claim is distinct from "damages" ultimately awarded by the court as compensation. The Court confirmed that the damage suffered by Mitchell Morgan under s. 34(2) of the CLA was its inability to recover the monies loaned. The Court's decision is distinct from the finding made by the Court of Appeal that Mitchell Morgan suffered two forms of damage (1) harm to its economic interests by paying out money when it would not otherwise have done so and (2) not having the benefit of security for the money paid out. The Court held that these statements identify the effects of the fraudsters' conduct, but do not properly identify the damage suffered by Mitchell Morgan. In the Court's conclusion, the acts of both the fraudsters and Hunt & Hunt were found to result in the same damage to Mitchell Morgan. In addition, the Court held that the conduct of the fraudsters led to the creation of the mortgage documents and thus was a contributing material cause to the ultimate damage suffered.

The Court confirmed that it is not a requirement of proportionate liability that the actions of one concurrent wrongdoer contribute to the negligence of another concurrent wrongdoer as long as each are found to have materially contributed to the damage suffered. In determining causation, the Court held that it is accepted that value judgments and policy considerations be considered to determine whether an act is sufficiently causative of the plaintiff's damage. Once causation of a concurrent wrongdoer is established in accordance with s.34(2), more extensive value judgments must be made by the court under s. 35(1) to determine the extent of each defendant's responsibility.

In conclusion, the Court held that Hunt & Hunt and the fraudsters were both concurrent wrongdoers as both materially contributed to the damage caused. However, the Court found that Hunt & Hunt could not have foreseen the fraudsters' forgery and that it was inconsistent with Part 4 that Hunt & Hunt be held wholly responsible for the damage given the fraudsters' conduct. The Court held that Hunt & Hunt should be responsible only for the share for which it was found responsible by the trial judge (12.5%). Special leave to appeal interest, awarded in accordance with the contract by the Court of Appeal, was denied.

The dissenting minority concluded that Hunt & Hunt was not a concurrent wrongdoer, that the damage caused by the actions of the fraudsters and Hunt & Hunt were distinct and that the Court of Appeal was correct to hold that that the fraudsters did not cause the economic loss – the lack of security – that was the subject of the claim by Mitchell Morgan against Hunt & Hunt.

Potential Significance

Acknowledging that the statutory framework in Australia distinguishes Australian negligence law from that which exists in Canada, this case is nonetheless instructive on the meaning and interpretation of concurrent wrongdoing. It may be relevant to provisions such as s. 138.6 of the Ontario Securities Act which creates a proportionate liability regime for secondary market misrepresentations absent fraud. In addition, the Court's reasoning may be helpful to courts when grappling with multifactorial causation questions including the concepts of joint concurrent tortfeasors, several concurrent tortfeasors, joint non-concurrent tortfeasors and several non-concurrent tortfeasors. Finally, given the ever increasing costs of liability insurance in Canada, the statutory regime in Australia regarding proportionate liability could foreshadow action taken by legislators in Canada to control this rising cost.

Case Information

Hunt & Hunt Lawyers v. Mitchell Morgan Nominees Pty Ltd, [2013] HCA 10

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