I tend to agree with IAN 2411: 4 years old is a bit young to be left alone. (Or was he supposed to be watched by the 10 year old?) But 12 years old, and not allowed out unsupervised? That seems a bit extreme. Do you live in an urban environment? That might be more reasonable, then. But I know my own kids (boys) were constantly out playing with friends, somewhere in the neighborhood, from the time they started going to school. Short of locking them in the house it would have been impossible to keep them at home by the time they were 8.
But then, my kids were taught that you don't solve problems by hurting others. Too many kids these days seem to think that the way to win an argument is to strike out, with a rope, or a gun, or their fists. Much of the blame for that has to go to the parents. The problem kids in our neighborhood were the ones whose parents thought they were perfectly innocent, incapable of lying or doing bad things. Those were the kids to keep an eye on.
So yes, I think both sets of parents have to accept some responsibility for this situation. But without knowing the history of the 10 year old it's impossible to say whether or not this could have been prevented. Was he a bully? Had there been other incidents of him attacking younger, smaller kids? This report doesn't say.