Farina & Lofts

In *Farina & Lofts*, the Supreme Court of New South Wales was asked to determine whether a solicitor, Mr. Lofts, had breached his duty of care to his clients, Mr. and Mrs. Farina, by failing to advise them of the risks associated with a particular investment. The Farinas alleged that Mr. Lofts had negligently advised them to invest in a company that subsequently collapsed, resulting in the loss of their entire investment. They claimed that had they been properly advised of the speculative nature of the investment and the potential for total loss, they would not have proceeded.

The central legal issue before Carew J was whether Mr. Lofts had met the standard of care expected of a reasonably competent solicitor in advising his clients on this investment. This involved considering the scope of the retainer, the nature of the advice provided, and whether that advice adequately disclosed the material risks inherent in the proposed transaction. The court had to assess whether the solicitor's conduct fell below the standard of a reasonably prudent solicitor acting in similar circumstances, taking into account the information available to him at the time.

Carew J found that Mr. Lofts had indeed breached his duty of care. His Honour reasoned that a solicitor's duty extends beyond merely facilitating a transaction; it includes providing clear and comprehensive advice on the risks involved, particularly when the investment is of a speculative nature. The court held that Mr. Lofts failed to adequately explain the significant risks of capital loss associated with the investment to the Farinas, thereby depriving them of the opportunity to make an informed decision. The principles of negligence, specifically the duty of care owed by a professional to their client and the assessment of that duty by reference to a reasonable standard of skill and diligence, were applied.

Consequently, Carew J ordered that Mr. Lofts pay damages to the Farinas representing the full amount of their lost investment, as the court found that the breach of duty had caused their loss.