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Last year, in Eddie Michael Awad & Anor v Twin Creek
Properties Pty Limited1, the Court made a
proportionate liability finding against a non-party solicitor.
The judgment in Perpetual Trustee Company Limited & Anor
v Peter Ishak2 delivered in June 2012, is the
second decision in recent times that the Court has made such a
finding.
Facts
Equis was a company controlled by Mr Ross.
Perpetual advanced A$1.6 million to Mr Ross to enable Equis to
purchase units located at Vaucluse.
Mr Ross entered into the loan transaction at the request of his
business associate, Mr Iaconis.
The Court held that Mr Iaconis was the architect of an
elaborate scam, in which Perpetual's loan for the proposed
purchase of the units would generate a cash surplus which Mr
Iaconis used to purchase a property at Maroubra for his own
purposes.
Unusually, Perpetual did not receive security for the loan at
settlement. Instead it relied on a title insurance policy.
The Vaucluse unit purchase did not proceed. Perpetual
subsequently discovered that:
contracts for the purchase of the units had not been exchanged
and Equis had not therefore obtained an equitable interest in the
properties
Perpetual held no enforceable security
the loan funds had been dissipated
Mr Ross had no ability to repay the loan.
Perpetual and the title insurer sued Mr Ross's conveyancer,
claiming that, among other things, he made representations that
were misleading and deceptive and that he breached s 45 of the
Fair Trading Act 1987 (NSW).
Section 45 provides that a person shall not, in trade or
commerce, in connection with the sale or grant or possible sale or
grant of an interest in land, make a false and misleading
representation concerning the nature of the interest in the
land.
Perpetual and the title insurer asserted that the loan was
advanced in reliance on the conveyancer's representations.
Apportioning liability to a non-party solicitor
The Court held that the conveyancer had breached s 45 and that s
45 did not attract the proportionate liability regime (unlike other
provisions in the Act).
The Judge went on to consider what would have happened if the
proportionate liability regime had applied and notionally
apportioned liability as follows:
50% to Mr Iaconis
25% to the conveyancer
25% to Perpetual's solicitors (who were not parties to the
proceedings).
The Court apportioned 25% to Perpetual's solicitors based on
the finding that the solicitors had failed to:
enquire as to whether contracts for the sale of the units had
been exchanged
confirm that Equis would have an equitable interest in the
units on settlement.
The proportionate liability regime in general terms provides for
proportionate liability among "concurrent
wrongdoers".
The recent Court of Appeal decision of Mitchell Morgan
Nominees Pty Ltd & Anor v Vella & Ors, emphasised the
need for "concurrent wrongdoers" to be liable in respect
of the "same damage". Consideration of "same
damage" was dealt with at a highly technical level.
In Perpetual v Ishak the Court followed the Vella
enquiry. In distinction to Vella, the Court found that the conduct
of Perpetual's solicitors caused Perpetual to proceed to
advance the loan to Mr Ross, which was regarded as causing the
"same damage" as the conveyancer's conduct.
Implications
The decisions of Perpetual v Ishak and Awad v Twin
Properties highlight a disturbing trend in the Court's
willingness to make a proportionate liability finding against a
solicitor who is not a party to the proceedings.
Footnotes
1Eddie Michael Awad & anor v Twin
Creek Properties Pty Ltd [2011] NSWSC 923 2Perpetual Trustee Company Limited & Anor v
Peter Ishak [2012] NSWSC 697
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