Mitchell Morgan Nominees Pty Ltd v Vella

In *Mitchell Morgan Nominees Pty Ltd v Vella*, the New South Wales Court of Appeal considered a dispute arising from a fraudulent loan and mortgage transaction. The purported borrower's signatures were forged, leading to the registration of a mortgage. The lender, Mitchell Morgan Nominees Pty Ltd, suffered a loss because its interest was not indefeasible as security for the loan amount. The lender sought to recover this loss from its solicitors, alleging negligence in failing to ensure the mortgage provided indefeasible security. The central question was whether the fraudsters who perpetrated the forgery were concurrent wrongdoers with the solicitors under Part 4 of the *Civil Liability Act 2002* (NSW).

The Court was required to determine whether the acts or omissions of the fraudsters caused the damage or loss that formed the subject of the lender's claim against the solicitors. Specifically, the Court had to consider whether the claim was one for economic loss and, in that context, how to distinguish between "damage" and "damages." A key aspect of the determination involved identifying the specific economic interest that had been harmed and applying the "mutual discharge test" to ascertain if the same loss had been caused by the respective wrongdoings of the fraudsters and the solicitors. The Court also had to consider the principles established in *St George Bank Ltd v Quinerts Pty Ltd* [2009] VSCA 245; (2009) 25 VR 666.

The Court reasoned that the solicitors were not concurrent wrongdoers with the fraudsters. The loss suffered by the lender was the failure to obtain indefeasible security for the loan amount, which was a direct consequence of the solicitors' negligence. The fraudsters' actions, while fraudulent, did not cause the specific economic loss claimed against the solicitors, which related to the inadequacy of the security documentation. The Court found that the "mutual discharge test" was not satisfied because the respective wrongdoings did not cause the same loss.

The Court ordered that the parties were to provide agreed short minutes of orders no later than 30 January 2012. In the event of disagreement, each party was to submit their own short minutes and written submissions of no more than three pages in support thereof within the same timeframe.