Last year, in Eddie Michael Awad & Anor v Twin Creek Properties Pty Limited 1, the Court made a proportionate liability finding against a non-party solicitor.
The judgment in Perpetual Trustee Company Limited & Anor v Peter Ishak 2 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
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.
