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Date: Tue, 19 Sep 2006 14:37:15 +1000 From: Neil Foster Subject: Duty of care owed by JP making a false attestation
Dear Colleagues; The recent decision of the NSWCA in Graham v Hall [2006] NSWCA 208 (13 Sept 2006) is an interesting decision on duty of care to avoid causing economic loss. A Justice of the Peace, Graham, witnessed the purported signature of Mrs Hall on a mortgage application in relation to a house owned jointly with her husband. (He had been asked to attest the signatures by a solicitor, Mr Gelin, who was found himself to have been negligent. The finding that the solicitor was liable was not appealed.) The JP indicated that he had seen Mrs Hall sign and that she was personally known to him. Both these things were untrue - Mr Hall presented Mr Graham with a pre-signed (forged) form. Mrs Hall discovered the fraud and the registered mortgage when Mr Hall died 2 years later. Due to the operation of the Torrens system here, the interest of the mortgagee was indefeasible (there being no relevant exception to indefeasibility under s 42 Real Property Act 1900 (NSW) - the mortgagee was not involved in Mr Graham's attestation and knew nothing of the fraud - and no in personam action.) It also seems (though this is not spelled out in the judgement) that Mrs Hall had no action against what is called in NSW the Torrens Assurance Fund (set up as part of the State "guarantee of title" under the RPA, Part 14) because the loss was partly due to the negligence of a solicitor- s 129(2)(b)(i). At least she had no action against that fund in relation to the solicitor's negligence, and (I guess) her advisers decided that since she had to sue the solicitor in negligence she may as well join the JP. The result was that the Court of Appeal (Ipp JA, with whom Giles & McColl JJA agreed) found that the JP did indeed owe a duty of care to the party not present when he attested the signatures. Given that this was seen as a "new" type of alleged duty of care in relation to economic loss Ipp JA undertook a process of identifying "analogous cases" and "factors which tend for or against" the duty - see [43]-[46], [49]ff. Hill v Van Erp where a solicitor was found to owe a duty of care to a disappointed beneficiary under a failed will was seen as analogous: "loss of interest in property that, but for [the defendant's] negligence, she would not have lost" - [51]. Finding a duty of care here would not "cut across" other interests - indeed, it would reinforce "appropriate conduct on the part of those who attest commercial documents such as mortgages" - [60]. Vulnerability of the plaintiff was also relevant. His Honour even went so far as to say that the status of Graham as a JP was not an essential element of the duty: "The duty arises irrespective of whether Mr Graham acted as a justice of the peace or as an ordinary witness" - [68]. {A salutary warning for those of us occasionally asked to attest documents as either legal practitioners or academics!} There were a couple of evidentiary issues on proof of breach, but all resolved in the plaintiff's favour. Causation was to be decided on the "two-stage" test now enshrined in s 5D of the Civil Liability Act 2002. Ipp JA rejected the proffered "normative considerations" as to why Mr Graham's dishonesty was not a "cause" of the forged mortgage being registered: it was not relevant that "someone else would have witnessed it if he did not" (seems right, though I wonder whether the law is quite as stated in para [81], that "unless the evidence is to a different effect, the Court should assume that individuals will behave honestly"). Suggested "floodgates" arguments were also rejected, based on the heavy potential liability that could arise - after all, as Ipp JA says, all that the law requires is that persons asked to attest to documents be honest! [82] There was then a discussion of a claimed statutory immunity. Section 135 of the Justices Act 1902 (NSW) provided an immunity for a JP acting "in the execution of his or her duty as a Justice with respect to a matter within his or her jurisdiction as a Justice", but only so long as the act was not "done maliciously and without reasonable and probable cause". The immunity was rejected for two reasons. (1) The attestation was not something the JP was "obliged" to do, so it was not part of his "duty" - [84]. {In any event the wording sounds like it is only meant to protect "judicial" actions, I would have thought.} (2) Signing an attestation clause like this dishonestly was an act done "maliciously" - [86]. {With respect, this point is not very convincing. I would have thought "malice" involved some sort of ill-will or intention to harm, rather than simply telling a lie. But I agree that the first reason was sufficient to remove the protection of the provision.} The result was that the trial judge's allocation of damages, 60% against the solicitor and 40% against the JP, was upheld.
Regards
Neil
Foster
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