Some time ago, it was said that the goodwill of a lawyer's
practice could be gauged by the number of documents held in his or
her safe custody facility. But there are risks for practitioners in
their retention of documents on a client's behalf -
particularly Certificates of Title.
In recent times, fraudulent dealings concerning real property,
including identity fraud, have become more prevalent
Practitioners are frequently called upon to release documents
urgently - but what is the extent of a solicitor's obligations
to ensure that a Certificate of Title is delivered to the correct
person/client? Is a solicitor's duty (simply) to act with
reasonable care? Alternatively, might the solicitor be under strict
The source of a solicitor's duty concerning documents
retained on behalf of his or her client is threefold:
the contract of retainer
a duty of care
The first two elements (contract and duty of care) oblige a
solicitor to act with reasonable care in the retention, and
release, of a client's documents.
There have been several cases in which solicitors have been
deceived into delivering a Certificate of Title into the hands of a
wrongdoer or fraudster.
In this context, the courts have imposed high standards of
"For a solicitor, handling
the title documents of a client or of a supposed client calls for
vigilance. Possession of a Certificate of Title is charged with
economic significance: loans are made on their mere deposit, even
without writing. ... a reasonable solicitor would have wanted to
see the clients, and would have wanted them to establish their
identities, or would have got a much better story than Mr ... gave
as to why they were not consulting a solicitor themselves. A
reasonable solicitor would have seen the new Certificate of Title
into their hands, or with their written authority would have seen
it into the hands of someone who was likely to have been an
appropriate recipient, such as a bank, finance house or another
A recent set of Supreme Court proceedings, however, prosecuted a
claim against a solicitor in bailment - and not in negligence.
Briefly, part of the factual matrix was:
the solicitor held a Certificate of Title for a client
the client had some initial telephone contact with the
the solicitor received a number of emails which were ostensibly
from the client's email address
("[client]@live.com.au"), but the establishment of the
email address was the work of a fraudster
the solicitor also received by email a certificate purportedly
signed by another solicitor - which included confirmation of a
"one hundred point" identity check by that other
solicitor. Again, this was the work of a fraudster
the solicitor handed over the Certificate of Title in
accordance with the email directions.
Part of the solicitor's defence was that he had acted
There was much technical consideration as to whether this was a
gratuitous bailment; or a bailment for reward - but the
real issue of substance was the risk that "no negligence"
did not operate as a defence to a breach of bailment claim - where
the alleged wrongful act was one of misdelivery (that is, not
delivering the Certificate of Title to its true owner).
The plaintiff, in that case, relied upon the leading text and
upon a 1989 Queensland Full Court decision 2, which held
that, in the case of misdelivery, the absence of negligence was no
defence to a bailment claim; and that the solicitor's liability
Ultimately, this piece of litigation settled.
While there is no New South Wales authority
determinative of the issue - practitioners should recognise a very
real risk that they may have a strict liability in circumstances
where a Certificate of Title is handed over by a solicitor to
someone other than its true owner.
Practitioners would be well advised to review their protocols
and procedures concerning the release of Certificates of Title and
other important documents - including an appropriate level of
identity check and verification.
1. Chandra & Anor v Perpetual Trustees Victoria Ltd
& Ors  NSWSC 694, at 106 per Bryson AJ.
2. Palmer, Prof N, "Palmer on Bailment", 3rd
Ed, at 15.024; and Jackson v Cochrane  2 QdR 23.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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