Kemp Strang recently acted for the Lender in the matter of Permanent Custodians Limited v Geagea and Ors [2014] NSWSC 562 and (no.3) [2014] NSWSC 1489 in which the Lender was successful against a solicitor in its claims of misleading and deceptive conduct and breach of warranty of authority. The decision is significant as the Court not only found in favour of the Lender, the Court found that damages awarded for a breach of warranty of authority are not apportionable under the Civil Liability Act 2002.
The Lender commenced proceedings against three brothers who were borrowers under a loan agreement and had provided the Lender with a mortgage over a residential property as security for the loan.
Before commencement of the proceedings all parties accepted that the signatures of one of the brothers on the loan agreement and mortgage were forgeries as at the time of signing he was in jail in Lebanon. Another brother also denied signing the loan agreement and mortgage and the third brother admitted that he forged the signature of the other two brothers.
Due to the forgery issues the Lender joined to the proceedings the solicitor who purported to have witnessed the signatures of two of the Borrowers and had attended to the settlement of the loan, providing cheque directions to the Lender and obtaining the cheques at settlement for the total amount borrowed.
Prior to the hearing the Lender settled with the Borrowers and proceeded only against the solicitor for negligence, misleading and deceptive conduct and for a breach of warranty of authority.
The Lender was ultimately successful in the proceedings against the solicitor. The judge found that solicitor misrepresented to the Lender that he was acting for all three borrowers when in fact he only acted for one of them. The Court also found that the solicitor had breached his warranty of authority by representing that he acted for all three borrowers at settlement.
The solicitor claimed that any liability he may have should be reduced as result of the operation of section 35 of the Civil Liability Act 2002. That section provides that a where a party's loss has been caused by more than one wrongdoer each wrongdoer should be liable for only that portion of the loss that the Court considers reflects the wrongdoer's contribution to the loss. In this case the solicitor claimed that the burden of the damages should fall upon broker that prepared and submitted the loan documentation.
The Court found that a claim for breach of warranty of authority is not an apportionable claim. The Court also found that where, as in this case, a party is liable under two separate causes of action one of which is an apportionable claim and the other not, the proportionate liability provisions do not apply.
The solicitor has applied to re-open the proceedings to further argue that a breach of warranty of authority claim is an apportionable claim which it claims was not addressed in submissions.
The motion is listed for hearing on 16 July 2015. We will provide a further update once the motion has been determined.
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