Cockburn v GIO Finance Ltd (No 2)

Reported Decision: 51 NSWLR 624

New South Wales

Court of Appeal

CITATION:	COCKBURN & ORS v GIO FINANCE LTD (No 2) [2001] NSWCA 177
FILE NUMBER(S):	CA 40461/00
HEARING DATE(S):	24 May 2001
JUDGMENT DATE:	14 June 2001
PARTIES :	Craig Manners COCKBURN & 5 Ors v GIO FINANCE LIMITED (No 2)
JUDGMENT OF:	Mason P at 1; Davies AJA at 47; Ipp AJA at 48

LOWER COURT JURISDICTION :	Supreme Court
LOWER COURT FILE NUMBER(S) :	ED 2803/98
LOWER COURT JUDICIAL OFFICER :	Foster AJ

COUNSEL:	Appellants: S Donaldson SC/R Pepper Respondent: S D Robb QC/A J Silink
SOLICITORS:	Appellants: Colin Biggers & Paisley Respondent: Kemp Strang
CATCHWORDS:	Equity - equitable contribution - recoupment - undue influence - rescission - mortgage and guarantee void ab initio - whether insurance company suffered loss on discharging mortgage - whether mortgagor suffered loss under void mortgage - whether solicitor and insurance company under co-ordinate liabilities to make good the one loss- whether solicitors liable in contribution . D.
DECISION:	Appeal upheld. Orders made - par 85.

CA 40461/00

ED 2803/98

MASON P

DAVIES AJA

IPP AJA

Craig Manners COCKBURN & ORS v GIO FINANCE LIMITED (No 2)

In 1987 Michael McNally (McNally) was rendered a quadriplegic in a car accident. McNally’s claim for damages arising out of the accident was settled for $1.49 million. He was then aged 16. In 1990 McNally bought his home and the following year an investment property.

McNally’s father was a trustee of the settlement moneys and generally administered his son’s affairs. However, these duties became confused by his personal interests and the affairs of his business, Movie Mart.

In September 1991 McNally executed various documents in favour of the respondent (GIO), including a deed of guarantee and indemnity and a mortgage over his two properties. The appellants (the solicitor) acted for McNally in the transaction. The mortgage showed McNally as the borrower and his father as guarantor, but in effect the loan was made to McNally’s father, with McNally guaranteeing the loan. Much of the money advanced was used to pay Movie Mart’s debts.

Movie Mart failed shortly afterwards. The GIO obtained possession of the investment property. Enforcement of the mortgage over the other property was restrained on an interlocutory basis pending proceedings. McNally sued both the GIO and the solicitor.

Cohen J held that the mortgage was the product of McNally’s father’s undue influence, of which GIO was at all material times constructively aware. This vitiated the transaction, and Cohen J ordered that the GIO deliver to the plaintiff a duly executed discharge of mortgage. With regard to the solicitor, Cohen J held that the partner involved had failed to exercise the necessary skill and care in advising the plaintiff. However he dismissed the claim against the solicitor “on the basis of the liability of [the GIO]”.

At trial GIO brought a cross-claim against the solicitor based on misleading and deceptive conduct relating to a certificate provided by the solicitor stating that the nature and…