Managing mad man
The High Court has answered the question of whether a common law duty of care will be found to exist in circumstances where a statute creates a performance standard.
A patient had a long history of chronic paranoid schizophrenia and was being treated for his illness at Echuca in Victoria. In July 2004, while in New South Wales with his friend Mr Rose, the patient was involuntarily admitted to Manning Base Hospital at Taree in New South Wales. A psychiatrist who saw the patient at the hospital recorded that the patient was a ‘mentally ill person.’ The medical superintendent of the hospital certified that she also believed that the patient was a ‘mentally ill person.’
On the day the patient was admitted to the hospital, the hospital obtained, and the psychiatrist read, the patient’s medical records. The psychiatrist spoke with the patient, the patient’s mother and his friend Mr Rose. All agreed that the patient would be kept in the hospital overnight and that Mr Rose would then drive with the patient to his mother’s home in Echuca where he would receive continuing medical treatment.
As proposed, the patient was discharged from the hospital on the following day. Mr Rose picked him up at the hospital and they set off for Echuca. In the course of that journey the patient killed Mr Rose. He told police that he had acted on impulse, believing that Mr Rose had killed him in a past life. The patient later took his own life.
The NSW Court of Appeal decided that the hospital owed Mr Rose a duty of care to prevent the patient causing harm to Mr Rose and also found that the psychiatrist was negligent in discharging the patient when he did. The Health Authority appealed to the High Court.
The High Court considered that the issue on appeal was whether there was a duty of care owed to the relatives at all. To determine whether there was a duty and the nature and scope of that duty the court found it was necessary to consider the Mental Health Act 1990.
The High Court said that determining that a person was ‘mentally ill’ did not require that a person must be, or must continue to be, involuntarily admitted and detained in a hospital. Rather the Act should be interpreted in such a way as to minimise the interference with the liberty of patients and people who are mentally ill.
The Act imposed an obligation not to detain a mentally ill patient unless a less restrictive kind of care was not reasonably available or appropriate. The performance of that obligation would not be consistent with a common law duty of care requiring regard to be had to the interests of those with whom the mentally ill person may come into contact with when not detained.
The High Court therefore decided that imposing the common law duty of care alleged by the relatives would be inconsistent with the provisions of the Mental Health Act. The appeal by the Health Authority was successful.
Hunter and New England Local Health District v McKenna; Hunter and New England Local Health District v Simon  HCA 44
A common law duty of care may not be imposed on a professional where such a duty of care is inconsistent with a performance standard already imposed by statute.
This article was written by Andrew McArthur, Senior Associate
Give it back
Sometimes insurers make a payment by mistake: to the wrong person, or for the wrong amount, or duplicating a payment already made. Must the recipient repay the money?
The High Court has considered a claim for recovery of money paid by mistake and, in particular, the defence of change of position.
The appellant was a financier specialising in business leases. One of its customers was Total Concept Projects Group. The director of that company created false invoices which pretended that the company had purchased equipment from Hills Industries and from Bosch. The director presented those false invoices to the appellant financier and, on the strength of those false invoices, the appellant agreed to purchase the equipment and to lease it back to Total Concept Projects.
The financier never actually saw the equipment, which of course did not exist anyway. It simply made electronic transfers, on the strength of the false invoices, to Hills and to Bosch. Hills and Bosch were of course unaware of the fraud. They applied the monies transferred to them in reduction of existing debts owed to them by Total Concept.
The fraud went undetected for about 6 months. During that period the appellant financier entered into further lease agreements with Total Concept. It also took security in the form of guarantees from the director and his associates and a mortgage over the director’s home. Also during that period Hills and Bosch continued to trade with Total Concept.
Total Concept was subsequently put into liquidation and the director was made bankrupt. The companies had liabilities totalling over $11M, but no assets. The sale of the director’s home netted only about $500,000.
The appellant demanded that Hills and Bosch repay the monies which the financier had paid to them by mistake.
The nature of such a claim is an action for ‘money had and received’. Recovery depends largely on the question whether it is equitable for the plaintiff to demand, or for the defendant to retain, the money.
A defence to the action is that the defendant has acted to his or her detriment on the faith of the receipt. Such detriment need not be monetary or capable of monetary calculation. The legal doctrine concerning detriment is concerned with the disadvantage to a person who has been induced to change his or her position on the strength of the payment.
The High Court noted that if the payments to Hills and Bosch were reversed, then they would become unpaid creditors of the company in liquidation.
Neither Hills nor Bosch would be able to reverse the consequences of their decisions to continue trading with the company. They were also disadvantaged because they had not pursued payment of the debts from the company. Those consequences were irreversible ‘as a practical matter of business.’
The High Court concluded that the disadvantages to Hills and Bosch if they were required to repay the monies received from the appellant were such that it would be inequitable to require them to do so.
Australian Financial Services and Leasing v Hills Industries
A person making a payment by mistake is entitled to demand that the money be repaid. But the right to repayment will be lost if the recipient establishes that it would be unfair to require repayment because the recipient had materially changed his or her position in reliance on the payment.
This article was written by Andrew Lyle, Partner
A headache for medical practitioners
The Queensland Court of Appeal has awarded an injured appellant damages in excess of $6.7 million, representing the highest award of damages ever made in a personal injury case in Queensland.
The appellant had consulted her general practitioner complaining of rushes of blood to her head which made her feel dizzy. The doctor queried the onset of menopause and referred the appellant for a mammogram. Three months later the appellant returned with more severe symptoms as well as periodic headaches and neck pain. The appellant consulted her doctor on four further occasions before being referred to Cairns Base Hospital, where she became seriously ill and was diagnosed with the deadly (and rare) fungal infection cryptococcal meningitis. The appellant lost her sight and hearing.
The Queensland Court of Appeal noted that the central focus was not that the doctor failed to diagnose the presence of cryptococcal meningitis but that the doctor failed to properly conduct a physical examination of the appellant; failed to recognise symptoms of her condition; and failed to appropriately refer the appellant for specialist assessment or to her local hospital for further assessment.
The Court of Appeal considered that the evidence established an observable restriction in the appellant’s range of movement and the existence of headaches in the context of a deteriorating condition. This was sufficient to support a conclusion that had the doctor exercised reasonable skill and care by undertaking a physical examination of the appellant’s neck and made appropriate enquiries as to the location, duration, frequency and severity of her headaches at the earlier consultations, she would have determined that the appellant had restricted neck movement and headaches in a region consistent with the possibility of meningeal infection.
Having regard to the fact that the appellant lived in Cairns where the disease is more common, the Court determined that the appellant’s symptoms ought to have resulted in the doctor referring the appellant for further investigation either to a specialist or to her local hospital. The doctor was therefore found liable in negligence for the appellant’s injuries.
Mules v Ferguson  QCA 5
This decision could have significant flow-on effects including a marked increase in specialist referrals by general practitioners of patients suffering from relatively common ailments, such as headaches and neck pain, in order to exclude the possibility of any sinister, underlying diagnosis.
It will be interesting to see whether the doctor’s insurers seek leave to appeal this decision to the High Court.
This article was written by Terri Hirbod-Bassi, Lawyer
Skating on thin ice
The plaintiff was a young man who attended an ice skating rink and hired a pair of skates from the front counter. In order to reach the ice skating rink from the counter, the plaintiff needed to descend a flight of stairs. Instead of putting the skates on at the bottom of the stairs, the plaintiff walked down the stairs with the skates on. The treads of the stairs were of inconsistent depth and the plaintiff’s skate blades were longer than the average depth of the treads. The stairs were wet from melted ice. The plaintiff fell over and was injured.
In finding the club negligent in the NSW District Court, the trial judge said that the club should have provided written and verbal warnings that participants should not put their skates on until after they had descended the stairs, or alternatively a warning that it was necessary to descend the stairs in a ‘splayed foot fashion’.
The trial judge rejected the club’s defence that the risk of harm which materialised was an ‘obvious risk’. In New South Wales, the Civil Liability Act provides that an ‘obvious risk’ is a risk that would have been obvious to a reasonable person in the position of the plaintiff. A defendant does not owe a duty of care to a plaintiff to warn of an obvious risk.
The Court of Appeal identified numerous errors with the trial judge’s reasoning. The most significant error was the trial judge’s identification of the risk of harm. Although the trial judge initially identified the risk to be that of falling when walking down stairs while wearing skates (which he said was clearly apparent), he also considered the relevant risk to include the uneven dimensions of the stairs and the stairs being wet. The problem with that logic was that both parties’ experts agreed that the wetness and dimensions of the stairs were not causative of the fall and that the sole cause was the skate blade being longer than the stair treads which resulted in an ‘overstep’.
The trial judge also wrongly considered whether the plaintiff had ‘acted reasonably’ and whether he had actual knowledge of the risks associated with descending the stairs in skates and actual knowledge of their wetness and uneven dimensions. The question that should have been asked was simply whether the risk of falling down the stairs while wearing skates would have been obvious to a reasonable person in the position of the plaintiff, not whether the plaintiff had subjective knowledge.
In answering that question, the Court of Appeal said that descending stairs involved an inherent risk of falling, which was heightened by doing so in ice skates, as wearing them would adversely affect the plaintiff’s balance given the length of the skate blade exceeded the length of the stair tread (unlike normal shoes). The Court of Appeal considered that those risks would have been obvious to a person in the plaintiff’s position, especially as he had observed other patrons using the stairs in skates.
The plaintiff’s pleaded case, and the trial judge’s finding, was that the club’s only breach of duty was its failure to provide the warnings referred to above (and not to take some other precaution). As the risk of harm which materialised was found to be ‘obvious’, there was no such duty owed and the club’s appeal was upheld.
Liverpool Catholic Club v Moor  NSWCA 394
This case serves as a reminder that the test to be applied in determining whether a risk is obvious under the Civil Liability Act is an objective test.
We query whether this case would have been determined differently in Victoria given there is no comparable ‘obvious risk’ provision in the Wrongs Act.
This article was written by Liam Fowler, Lawyer
Who is in control?
The New South Wales Court of Appeal increased the contribution of a principal, RFI (Aust) Pty Ltd, toward an award of personal injury damages to a contractor’s employee, from 50 percent to 75 percent.
The case involved a plaintiff who suffered severe injury while working as a storeman at the premises of his employer. The plaintiff and his co-worker opened the rear doors of a large furniture van when two rolls of very heavy carpet underlay fell out and struck the plaintiff.
RFI had loaded the van in Melbourne before it commenced its journey to Sydney. To save money on deliveries, RFI utilised all of the available space in the delivery truck, stacking rolls of carpet underlay both vertically and horizontally in the truck. The delivery truck had five metal braces in place to secure the load. On the date of the incident, RFI had only secured three of the five braces. This represented a complete departure from its standard practice and was directly causative of the incident.
The trial judge found RFI and the plaintiff’s employer equally at fault and apportioned their responsibility for the injuries in the ratio of 50 percent each.
The impact of the New South Wales work injury damages regime prompted the plaintiff to appeal, seeking to maximise RFI’s responsibility for the incident and therefore reduce the percentage of damages restricted by the Workers’ Compensation Act (NSW) 1987.
The Court of Appeal agreed that the employer had some element of responsibility for the plaintiff’s injury because its system of inspection with respect to the delivery of loads only required workers to check for loose rolls of underlay visible from the ground level. A proper system of inspection would have required inspecting the load from a higher vantage point, to ensure an adequate view of the top of the load. Had the employer implemented this system, the probability was that the loose rolls would have been seen and dealt with in a way that would have prevented them from falling on the plaintiff.
However, the Court of Appeal held that RFI’s failure to restrain the rolls of underlay with the fifth brace was of significantly greater importance in causing the incident than the employer’s deficient system of inspection. The loads were usually secured by four or five braces, and by only having three in place there was a complete failure of proper practice by RFI. In the circumstances it was “plainly unreasonable” for the trial judge to find RFI and the employer equally responsible.
The Court of Appeal apportioned 75 percent of the liability to RFI and the employer’s responsibility was reduced to 25 percent.
Grima v RFI (Aust) Pty Ltd
This is another example of a principal facing a greater exposure than a contractor as the principal had a sufficient degree of ‘control’ over the system of work, despite the injury occurring at the contractor’s own premises.
This article was written by Ahranee Vijayaseelan, Senior Associate
In a case considered by the UK High Court of Justice, Cargo vessel B ATLANTIC was detained and forfeited to the Venezuelan government after an underwater inspection revealed a cache of 132 kilograms of cocaine strapped to her hull. The Master and Second Officer of the vessel were subsequently convicted of drug smuggling offences pursuant to Venezuelan law.
The owners of the vessel, who were not in any way involved in the drug smuggling, made a claim under their policy of War Risk insurance, seeking indemnity in relation to the value of the confiscated vessel. Although the policy provided cover in respect of capture, detainment, confiscation as well as terrorist or malicious acts, the insurers denied indemnity on the basis that the policy declined cover in circumstances where there was an infringement of customs regulations.
The owners disputed the insurers’ denial of indemnity on the basis that the loss of the ship was attributable to the malicious acts of the drug smugglers who placed the drugs on the ship’s hull, or alternatively, members of the Venezuelan government whom the owners alleged had conspired to seize the vessel.
While conceding that the infringement of customs regulations (an event excluded under the policy) may have been a cause of the loss, the owners argued that the real or proximate cause was the malicious act (an event covered under the policy) of unknown persons placing cocaine on the vessel. Although the owners conceded that this causation argument contravened the established principle in relation to proximate causes in Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd, they submitted that cases such as this should form an exception to the Wayne Tank principle.
Alternatively the owners argued that the insurers were prevented from relying on the customs regulations exclusion in circumstances where the relevant infringement was caused by the malicious acts of others. The owners argued that if the insurers were entitled to do so, the practical effect of such an exclusion would be to severely restrict the level of cover provided.
The Court held that the policy wording is subject to the implied limitation that the customs regulations exclusion could not apply where the only reason there had been an infringement was the malicious acts of third parties. Having found that the placement of cocaine constituted a malicious act, the Court determined that the owners were entitled to cover in the circumstances.
Atlasnavios-Navegacao v Navigators Insurance Company Ltd & Ors  EWHC 4133
This British case demonstrates that regardless of the jurisdiction or the context, courts will generally construe ambiguities or inconsistencies in a policy of insurance in a manner which is favourable to the insured. This is particularly so when an insurer alleges a construction of the policy wording that restricts the scope of cover to a significant extent.
This article was written by David Carolan, Lawyer