Perpetual Trustee Company Ltd v Ishak - [2012] NSWSC 697

Supreme Court

New South Wales

Medium Neutral Citation: Perpetual Trustee Company Limited & anor v Peter Ishak [2012] NSWSC 697
Hearing dates: 17, 21, 23, 24, 25, 28 June 2010; 1, 2, 5, 6, July 2010; 27 April 2011
Decision date: 25 June 2012
Jurisdiction: Equity Division
Before: Brereton J
Decision:
Defendant engaged in misleading and deceptive conduct in contravention of Fair Trading Act, s 42, and made false representations in connection with potential grant of interest in land as to nature of the interest in contravention of s 45, and thereby Plaintiffs suffered loss. No apportionment between concurrent wrongdoers as proportionate liability does not apply in respect of s 45.

Catchwords:
TRADE PRACTICES - Misleading and deceptive conduct - conveyancer represented to incoming mortgagee that contracts had been exchanged - incoming mortgagee advanced funds where borrower had represented that contracts had been exchanged - Whether conduct misleading or deceptive - Misrepresentation by conduct - (NSW) Fair Trading Act 1987 s 42, 68.

TRADE PRACTICES - Misleading and deceptive conduct - conveyancer represented to title insurer for incoming mortgagee that contracts had been exchanged - title insurer accepted risk where borrower had represented that contracts had been exchanged - Whether conduct misleading or deceptive - Misrepresentation by conduct - (NSW) Fair Trading Act 1987 s 42, 68.

TRADE PRACTICES - false or misleading representations concerning the nature of an interest in land - whether representation concerned the nature of an interest in land - misrepresentation concerning grant of an equitable interest in land by falsely representing to mortgagee that mortgagor had equitable interest in land - misrepresentation by agents - (NSW) Fair Trading Act 1987 s 45.

TRADE PRACTICES - Misleading and deceptive conduct - conveyancer represented to incoming mortgagee that he had instructions to apply funds to purchase of certain real property - Whether conduct misleading or deceptive - Whether representation concerned an interest in land - Misrepresentation by conduct - (NSW) Fair Trading Act 1987 s 42.

TRADE PRACTICES - Misleading and deceptive conduct - misrepresentation by non-disclosure - conveyancer acting for purchaser and mortgagee did not disclose that client was contemplating alternative arrangements to purchase property - Whether conduct misleading or deceptive - Whether duty to disclose existed - (NSW) Fair Trading Act 1987 s 42.

CAUSATION - Trade practices - Misleading and deceptive conduct -whether contravening conduct a cause of the loss or damages - causal connection established by inference - where title insurer liable to indemnify lender in respect of loan where borrower had no equitable interest in property - where lender insured against risk that materialised - whether insurance operates to extinguish loss - loss to insured caused by misrepresentation to insurer.

TORTS - duty of care of conveyancer to client when acting in respect of loan transactions - duty based on responsibility and vulnerability - client acquiesced in conveyancer taking instructions from third party - whether breach of duty by making misrepresentations to counterparty to loan transaction.
PROPORTIONATE LIABILITY - Loan and mortgage transaction - Fraudster liable to lender for fraud - conveyancer misrepresented to lender that borrower had equitable interest in property - lender's solicitor liable for failing to make proper inquiries - Whether concurrent wrongdoers - Pt 4 of Civil Liability Act 2002 - Whether acts or omissions caused the same damage or loss the subject of lender's claim - Difference between damage and damages - conveyancer, solicitor, and fraudster concurrent wrongdoers in causing lender to advance loan funds - apportion liability 50% to fraudster, 25% to solicitors and 25% to conveyancer.
Legislation Cited: (CTH) Australian Securities and Investment Commission Act 2001, s 12DC
(CTH) Trade Practices Act 1974, s 53; s 53A; s 82
(NSW) Civil Liability Act 2002, s 34; s 35
(NSW) Fair Trading Act 1987 s4; s 42; s 45; s 68; s 72
Cases Cited: Arab Bank plc v John D Wood Ltd [2000] 1 WLR 857;
Australian Crime Commission v Gray [2003] NSWCA 318;
Baiyai Pty Ltd v Guy [2009] NSWCA 65;
Benlist Pty Ltd v Olivetti Australia Pty Ltd [1990] FCA 288; (1990) ATPR 41-043;
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592;
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304;
Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178;
Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd [1998] FCA 693; (1998) 155 ALR 714;
Demagogue Pty Limited v Ramensky [1992] FCA 557; (1992) 39 FCR 31;
DigiÂTech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184;
Galaxidis v Galaxidis [2004] NSWCA 111;
Gardam v George Wills & Co Ltd [1988] FCA 194; (1988) 82 ALR 415;
Garvey v Vamamu Pty Ltd [1998] NSWSC 444; (1998) ATPR 41-656;
Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60;
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82;
Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545;
Henjo Investments Ply Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40; (1988) 39 FCR 546;
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459;
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109;
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 37 FCR 526;
John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd [1993] FCA 295; (1993) ATPR 41-249;
Kayteal Pty Ltd v Dignan [2011] NSWSC 197;
Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458;
Lezam Pty Ltd v Seabridge Australia Pty Ltd [1992] FCA 206; (1992) 35 FCR 535;
Miller & Associates Insurance Broking v BMW Australia Finance [2010] HCA 31; (2010) 241 CLR 357;
Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390;
Monroe Topple & Associates Pty Limited v Institute of Chartered Accountants (Aust) [2001] FCA 1056;
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191;
Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351;
Poseidon Ltd v Adelaide Petroleum NL [1991] FCA 663; (1991) 105 ALR 25;
Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187;
Rhone-Poulenc Agrochomie SA v UIM Chemical Services Pty Ltd [1986] FCA 218; (1986) 12 FCR 477;
Street v Luna Park Sydney Ply Limited [2009] NSWSC 1; (2009) 223 FLR 245;
Sullivan v Sullivan [2006] NSWCA 312;
Sutton v AJ Thompson Pty Ltd (In Liq) [1987] FCA 167; (1987) 73 ALR 233;
Taco Co of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177;
Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574;
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1993] FCA 630; (1992) 38 FCR 1;
Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505;
Watson v Foxman (1995) 49 NSWLR 315;
World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181;
Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463.
Category: Principal judgment
Parties: Perpetual Trustee Company Ltd (First Plaintiff)
First American Title Insurance Company of Australia Pty Ltd (Second Plaintiff)
Peter Ishak (First Defendant)
David Ross (Second Defendant)
Representation: A Leopold SC, DFC Thomas (plaintiffs)
DJ Russell SC, JV Gooley (first defendant)
Allens Arthur Robinson (plaintiffs)
Maccallum Lawyers (first defendant)

File Number(s): 2006/259941

Judgment

The prospect that upon settlement of a loan transaction involving advances of $1.6 million a sophisticated lender such as the first plaintiff Perpetual Trustee Company Limited ("Perpetual") might hand over to its borrower the second defendant Mr Ross cheques for that amount but receive no certificate of title, discharge of outgoing mortgage, mortgage or transfer in return, nor even any undertaking to deliver them, might appear almost incredible. But that is what happened in this case, on the faith of a mortgage lending policy issued to Perpetual by the second plaintiff First American Title Insurance Company of Australia Pty Ltd ("First Title"). The funds advanced have been dissipated; Mr Ross is a man of straw; and Perpetual holds no enforceable security. Perpetual and First Title now sue the conveyancer who acted for Mr Ross - the defendant Peter Ishak - alleging that the issue of the policy, the advance of the loan funds, and the subsequent omission to stop payment on the cheques before they were dissipated, were occasioned by misleading and deceptive conduct on his part.

Background

Elite Apartments Pty Ltd ("Elite") was the registered proprietor of land in Old South Head Road, Vaucluse, on which it developed an apartment block comprising five units, construction of which was completed in late 2004, with the strata plan being registered in March 2005. The Arab Bank held a mortgage from Elite over the five units.

Comlend Securities Pty Ltd ("Comlend") was incorporated in December 2004, apparently at the instance of Mr Antonio Iaconis as a vehicle for property dealings. It had three shareholders: Mr Iaconis, Mr Ross, and Mr Williams, and it employed Mr Nesa Padayachee as a mortgage broker.

Proposed purchase of the Vaucluse units

In about March 2005, Mr Iaconis discussed with Mr Ross a proposal to purchase all five Vaucluse units. He told Mr Ross that he had negotiated a deal with Elite that involved vendor finance, but could not buy the units in his own name. Mr Ross, who was at all material times the sole director and shareholder of Equis Securities Pty Ltd ("Equis"), agreed to his request to have Equis undertake the purchase, on terms that Mr Iaconis would discharge Mr Ross' debts (which were in the order of $700,000, although according to Mr Ross their quantum was not discussed).

Mr Ishak was a licensed conveyancer, who carried on business as a sole practitioner under the name and style "P & A Conveyancing". Mr Ishak first met Mr Ross, in company with Mr Iaconis, in March or early April 2005, when they discussed the prospective pursuit of property deals by Mr Iaconis and Mr Ross. Mr Iaconis told Mr Ishak that he could not own any property in his personal name, or be a company director, for a minimum of three years. While Mr Ishak denied knowledge of this alarming information, he had recorded it in a file note that he made on 1 October 2005 when he decided to document the events.

Mr Ishak says - although Mr Ross does not accept - that they reached an arrangement that in relation to the purchase of the properties (including the Vaucluse units), Mr Ishak would take his instructions from Mr Iaconis. In this respect, I prefer the evidence of Mr Ishak as far more probable in the light of Mr Ross' general attitude to the transactions thereafter, including his explanation that he did not seek to give instructions to Mr Ishak because "I was a tool for the purchase being run by Iaconis with the legal matters attended to by Ishak".

Mr Iaconis was able to create the appearance, to Mr Ishak, of being wealthy, and became an apparently very valuable client, who Mr Ishak did his utmost to satisfy. Mr Ishak, who was then 26 years of age, was under some financial stress, having a pressing taxation debt. He developed a close personal and professional relationship with Mr Iaconis, and over the next several months worked practically full-time for him, consulting extensively in respect of many proposed property transactions (of which only one, the purchase of a home at Maroubra for Mr Iaconis, further mentioned below, came to exchange). Mr Ishak perceived that he became important to Mr Iaconis by doing this work, and he agreed that he was prepared "to do whatever it takes to make sure that I pleased the client" within his capacity as a conveyancer, and that he did do whatever it took within his capacity as a conveyancer to achieve Mr Iaconis' "objectives". However, while indicative of an admitted desire on the part of Mr Ishak to do his utmost to please Mr Iaconis, I do not take any of these to be concessions on Mr Ishak's part that he was prepared to act improperly to do so.

Although it was initially contemplated that Equis could acquire all five Vaucluse units, it appears that by early April 2005 the view had been adopted that Equis should, at least initially, acquire only Units 1 and 2 ("the Units") - although the possibility of the subsequent acquisition of the other three remained alive. On about 31 March or 1 April, Mr Ross signed two loan applications to Resimac - a mortgage broker and manager for Perpetual - each for an advance (to him as borrower) of $800,000, to fund the purchase of the Units.

On 4 April, Consolidated Lawyers ("Consolidated"), whose Mr Kassem acted for Elite, sent contracts for sale of the Units to Mr Ishak. Mr Ross, on behalf of Equis, signed those contracts on or about 8 April. Also on 8 April, Mr Ishak wrote to Consolidated, stating that exchange and settlement should occur simultaneously, within two to three weeks, and that the total consideration payable on all five units on completion was to be $3 million, with a further $1.7 million to be paid 12 months after completion. On 12 April, Consolidated wrote to Mr Ishak, referring to a sum of $100,000 to be paid forthwith, which may explain why, in subsequent communications, the total price for the five units was said to be $4.6 million.

On 27 April, Resimac approved Mr Ross's applications for two loans, in respect of units 1 and 2 respectively. Each loan approval stipulated that the loan was to be secured by first priority registered mortgages over the relevant unit.

On or about 28 April, Fidelity Mortgage Corporation ("Fidelity"), a mortgage originator, on behalf of Resimac and Perpetual, instructed Heidtman & Co ("Heidtmans"), solicitors to act for Perpetual as lender/mortgagee in respect of the loans. Heidtmans were instructed to procure first priority registered mortgages over the Units. Mr McLoughlin, a paralegal, had the conduct of the matter at Heidtmans.

On 9 May, Consolidated wrote to Mr Ishak that they "would like to agree on specific terms and conditions of the Contract for Sale of Land", particularly as to the vendor finance and the security for it. As will appear, this issue of the vendor finance and security for it was never resolved.

On 19 May, Mr Ishak wrote to Heidtmans, enclosing the front pages of two forms of Contract for Sale, of units 1 and 2 respectively, signed by Mr Ross on behalf of Equis only, and undated. As solicitors for the incoming mortgagee, Heidtmans on 25 May forwarded to Mr Ross at his home address the requisite security documentation in respect of the proposed loans - the loan agreements, the mortgages and ancillary documents.

Meanwhile, on 19 May, Mr Iaconis exchanged contracts with J & M Giannikouris to acquire a substantial home at Maroubra. Under this contract, the second instalment of the deposit, being $185,000, was payable by 16 June 2005, in default of which the portion already paid - also $185,000 - would or could be forfeited. As the Plaintiffs emphasise, Mr Ishak knew and understood this. Mr laconis entered into occupation of the Maroubra property during May.

On 1 June, Consolidated wrote to Mr Ishak, pressing for a response in respect of security for the vendor finance. On the morning of 3 June, Mr Iaconis, Mr Ishak and Mr Padayachee met with Elite's representatives, including Mr Kassem, at the Maroubra property. As recorded in a letter from Consolidated to Mr Padayachee, it was agreed, in effect, that the total purchase price (for five units) was $4.6 million, but the price for units 1 and 2 was reduced to $900,000; that the simultaneous exchange and settlement of Units 1 and 2 would coincide with exchange in respect of units 3, 4 and 5, with settlement of units 3, 4 and 5 to follow within 21 days; that additional security was to be provided in respect of the vendor finance; that the up-front payment in respect of Units 1 and 2 would be a total of only $1 million, with the vendor to carry finance of $380,000 in respect of each of Units 1 and 2; and that there was to be a rebate of $200,000 in respect of each of Units 1 and 2 if the purchaser settled on or before 31 July 2005. The practical effect of these arrangements was that Mr laconis (in the company of Mr Ishak) had created a cash surplus on the acquisition of Units 1 and 2 of about $400,000. Sometime in May - in any event, prior to 10 June - Mr Iaconis had disclosed to Mr Ishak his intention to access this $400,000 for the purpose of obtaining the second portion of the deposit payable in respect of his Maroubra purchase, which was due (as things then stood) on 16 June; Mr Iaconis told Mr Ishak that he would reimburse those funds later from funds he was expecting from another source.

Subsequently, that afternoon, Mr Ishak met with Mr Ross, in the company of Mr laconis and Mr Padayachee. Mr Ishak asked Mr Ross whether he was aware of the loan amounts ($800,000 per unit), but Mr Ross's attention was not drawn to the circumstance that he would be borrowing $800,000 per unit when only $500,000 per unit would now be required as an up-front payment on settlement of the purchase. Mr Ross executed (witnessed by Mr Ishak) a loan agreement between Perpetual as lender and himself as borrower for a loan of $800,000 to be secured by mortgage over unit 1, an identical loan agreement for a further $800,000 to be secured over unit 2, a mortgage of unit 1, a mortgage of unit 2, and other associated documentation, including an undertaking as borrower that the advance would be used only to fund the purchase of the Units. Mr Ross said that he did so under pressure from and in the presence of four men, including Mr Ishak and Mr Iaconis, and presumably Mr Padayachee, but his evidence does not indicate any actual or improper pressure - he described it as "implied pressure". Under cover of letters dated 3 June, Mr Ishak then forwarded the loan documentation, including the mortgages, together with unsigned transfers of units 1 and 2, and copies of the first page of each contract for sale, signed by Mr Ross but undated, to Heidtmans "in readiness for settlement".

Mr Ross says that on 3 or 4 June he told Mr Ishak not to settle the purchase without specific instructions from him personally to do so, and that Mr Ishak agreed that he would not do so but revert to Mr Ross first. Mr Ishak denies this. I return to the resolution of this contentious issue, below.

The proposed 10 June settlement

Settlement was appointed for 10 June. A letter of 7 June from Heidtmans to Ishak anticipated settlement of all aspects of the transaction - including the property purchase. It is clear that, at that stage, completion of the purchase of the units - not just the advance of the loan funds - was contemplated.

By 8 June, Mr Ross on behalf of Equis and in his own right as guarantor, executed Heads of Agreement between Elite, Equis and Mr Ross, providing for the purchase by Equis of the five units for a total consideration of $4.6 million, apportioned $900,000 to each of units 1, 2 and 3; $1.4 million for unit 4; and $500,000 for unit 5. These Heads of Agreement contemplated payment of $1 million on the simultaneous settlement of units 1 and 2, $1.5 million on the (later) simultaneous settlement of units 3, 4 and 5, and the balance of $2.1 million within twelve months thereafter, for which additional security was to be provided. Mr Ross' signature was witnessed by Mr Ishak.

On 9 June, Consolidated sent Mr Ishak directions for payment. On the same day, in faxes from his firm to Heidtmans, Mr Ishak advised that settlement of the advance from Perpetual to Equis in respect of units 1 and 2 was to take place on 10 June 2005 at 3:00pm, and provided directions for settlement cheques in favour of, inter alia, Arab Bank (to obtain a discharge of mortgage), the office of State Revenue (for stamp duty), Consolidated (the vendor's solicitors), Sydney Water (for water rates), and Elite (the vendor). These cheque directions issued by Mr Ishak conformed to the directions given by Consolidated, and specified that approximately $350,000 of the surplus cash should be payable to Equis, with the other $50,000 directed to Mr Ishak himself.

Also on 9 June, Consolidated wrote to Mr Ishak, pointing out that there were two matters still outstanding that needed to be completed prior to settlement, namely proof from the incoming mortgagee of the amount of the loan, and details of the additional security for the vendor finance.

On 10 June, the loan funds were transferred to Heidtmans' trust account, and the requisite bank cheques were purchased and trust cheques drawn in preparation for settlement. While it appears that Elite had hoped to settle on 10 June, it had encountered a last minute problem with its mortgagee the Arab Bank, which was not prepared to release its security over the two units until it was fully repaid the whole of its debt: in other words, it would not give a partial discharge of its security on account of a part payment of its debt. In addition, Equis had not complied with the two requirements that Consolidated had emphasised in its 9 June letter; and terms had not been finally agreed between Elite as vendor and Equis as purchaser.

Neither Arab Bank nor Elite attended on settlement on 10 June, and accordingly settlement did not take place that day - due to the unsatisfied requirements by Arab Bank of Elite (for repayment in full in return for a discharge), and also to the unsatisfied requirements by Elite of Equis (in particular in respect of security for the vendor finance). However, Mr Ross became liable to pay interest on $1.6 million from 10 June, and on 14 June, Mr Ishak acknowledged to Heidtmans that his "client" was aware that interest on the advances had commenced to run from that day, when they had been drawn down. Mr Ross denies that he was personally so aware, and in the absence of evidence of any communication with him to that effect or at that time, I accept his evidence in this respect.

Settlement was re-booked for 14 June, but again cancelled.

Proposed use of title insurance

Soon after 10 June, Mr Iaconis told Mr Ishak that he had approached a contact at First Title and had sought to obtain title insurance to enable the loan moneys to be advanced before completion of the property purchase. Mr Ishak's immediate response was: "That's impossible, you haven't even exchanged contracts yet".

On 14 June, some time prior to 6:00pm, Mr laconis spoke to Ms Comerford of First Title, and thereafter told Mr Ishak that he had spoken to his contact at First Title and had "organised for an insurance policy to be obtained ... which will enable them to settle the finance component of this transaction with Resimac in anticipation of the property settlement with the vendor" and that, as a result, "they should be in a position to settle in a few days". At 5:23pm, Mr Ishak wrote to the solicitors for J & M Giannikouris, seeking an extension until 24 June of the time for payment of the further $185,000 deposit in respect of Mr Iaconis' Maroubra purchase. Although this letter referred to an intention to utilise moneys to be received from overseas, Mr Ishak had previously been told that the source of the balance deposit was to be the surplus cash from the Perpetual loan moneys.

On 15 June, Consolidated wrote to Mr Ishak, reiterating Elite's outstanding requirements, in particular in respect of security for the vendor finance. Mr Ishak had a telephone conversation with Mr Downes, a manager at First Title, who had already spoken to Mr Iaconis. In the course of this conversation, Mr Ishak said that settlement fell over the previous week "because Arab Bank wouldn't provide discharge", and had been re-booked for that afternoon; he explained that Arab Bank would not discharge until all five units were sold. Mr Downes said that he would need to see the contract, title search and valuation, to which Mr Ishak responded that Heidtmans "have all this". Mr Downes sent an email to Ms Wong of Resimac, offering to insure that Resimac/Perpetual had a first ranking registered mortgage: "essentially, Perpetual can rely on our policy until the mortgage is discharged and Perpetual's mortgage is registered"; to which Ms Wong replied that she would be pleased to have the transaction insured on that basis.

On 16 June, Mr Downes spoke to Mr Kassem at Consolidated, who confirmed that Arab Bank would not discharge its mortgages until all 5 units were purchased, for the reason that Arab Bank would not have sufficient security if the mortgages over Units 1 and 2 were discharged. Mr Kassem said that Elite was "arranging alternative security". Mr Downes made the following file note:

If we pay out Arab Bank over 2 Units, we will be subrogated to their rights as mortgagee - worst case scenario - can arrange transfer of mortgage.

Mr Ishak rang Mr Downes, requesting that settlement be booked expeditiously. Mr Downes raised Mr Kassem's suggestion that alternative security was being arranged, and Mr Ishak responded "this is being progressed", and did not reveal that the question of security for the vendor finance was not resolved.

Also 16 June, Mr McLoughlin at Heidtmans sent an email to Mr Downes, stating that settlement had been cancelled the previous day and that Heidtmans had returned all funds to Resimac, and enquiring whether settlement could be re-booked without any certificate of title, discharge of mortgage or transfer being available, or alternatively to wait until the vendor was in a position to settle. Mr McLoughlin thus contemplated that not only would there be no certificates of title nor discharges of mortgage, but also no transfers. Mr Downes' response proceeded on the same assumption. Mr McLoughlin sent another email to Mr Downes, noting that, in the 9 June cheque directions, Elite had been specified as a payee of a cheque for $75,000, and stating that "all the proceeds of the sale did not appear to be being used to pay out ARAB Bank Australia Limited who apparently will not release this security property".

Still on 16 June, Mr Downes sent a facsimile letter to Mr Padayachee at Comlend, confirming that after discussions with Heidtmans, the lender and the vendor's solicitor, First Title was in a position to issue insurance policies to Perpetual/Resimac to allow settlement of the Units to take place, without receiving discharges of mortgage and title documents from the Arab Bank until the remaining units were purchased. With the letter was enclosed a Request for Insurance Order Form (somewhat strangely, as Perpetual rather than Mr Ross was to be the insured). In his evidence, Mr Downes explained that he perceived the insured risk to be a "timing issue", in the sense that First Title would be on risk until the remaining three units had been sold, or Elite had arranged alternative security as required by Arab Bank.

On 20 June, Consolidated wrote a letter to Mr Ishak, asserting that Equis' failure to substantiate the amount of the loan on the properties being $3.8 million was a repudiation of the "initial agreement" between the parties and purporting to terminate that agreement. However, this letter was not received by Mr Ishak until 24 June, and the evidence does not establish whether it was received before or after the settlement of that date.

On 21 or 22 June, Mr Ross signed the Request for Insurance Order Form, although he says that the form was not completed when he signed it.

On 22 June, Mr Ishak and Mr Downes had their third telephone conversation. Mr Ishak said that he was keen to organise settlement "ASAP". Mr Downes said that the policy could be issued straight away, so that settlement could take place without discharges of mortgage. Mr Ishak asked whether Heidtmans could contact him on his mobile, so that he could give them directions and authority regarding the disbursement of funds. Mr Downes said that Mr Ishak would need to chase up discharges of mortgage following settlement, so that the mortgages could be registered. According to Mr Downes, Mr Ishak responded that the sale of the remaining units should go through in three weeks, so that Mr Downes would be able to get discharges by then at the latest, which Mr Ishak - who otherwise did not dispute this conversation - denied; on this I prefer Mr Downes: Mr Ishak's initial response was that he did not "think" he had said it, that he did not recall and that he did not deny it, but he then reconstructed that he "would not" have said such a thing.

In the afternoon of 22 June, Mr Downes sent an email to Mr McLoughlin, stating that the borrower had indicated that they now wanted to proceed to settlement, and asking Mr McLoughlin to ring Mr Ishak's mobile number "to discuss arranging the funds and the direction and authority". Mr McLoughlin asked Mr Ishak to advise whether Perpetual would be receiving a transfer for each file from the vendor. Mr McLoughlin reported the conversation in an email that day to Mr Downes, in which he also recorded that he presumed that Perpetual would still be "collecting" transfers, "as this is a purchase".

The 23 June cheque directions

By fax to Heidtmans on 23 June, Mr Ishak advised that settlement was scheduled for Friday 24 June, and directed settlement cheques, including in favour of Elite, Arab Bank, Consolidated Lawyers, the Office of State Revenue, and Sydney Water; the surplus (of about $400,000) was now to be payable to J & M Giannikouris and Asenhurst (in lieu of to Equis, as had been the case in anticipation of the proposed 10 June settlement). As was the case in the directions for the 10 June settlement, $50,000 was to be payable to Mr Ishak; this represented his fees for acting for Mr Iaconis generally, and was required urgently by Mr Ishak to meet his obligations to the Australian Taxation Office which, in his evidence, he described as "my most important issue". Mr Ishak said that the fixing of settlement on 24 June and the cheque directions of 23 June followed a telephone conversation he had with Mr laconis between 20 and 23 June, in which Mr Iaconis directed that cheques be payable to J & M Giannikouris and Asenhurst, and in which Mr Ishak himself sought and received authority for a cheque for $50,000 payable to himself. Although the Plaintiffs submit that Mr Ishak should not be believed in his assertion that he had a telephone conversation in those terms - and as he had given directions for a cheque payable to himself prior to 10 June it is unlikely that this was revisited, I agree that a conversation in the precise terms alleged is unlikely - in my view it is probable to a very high degree that in appointing settlement and issuing the cheque directions he was acting in accordance with Mr Iaconis' instructions.

Mr Ishak also claims that, shortly after having spoken to Mr Iaconis, he spoke to Mr Ross and obtained his authority to direct cheques in favour of J & M Giannikouris, Asenhurst and Mr Ishak himself. Mr Ross denied any such conversation, and said that he had never even heard of Giannikouris as at June 2005. On this I prefer Mr Ross. Mr Ishak took his instructions from Mr Iaconis, not from Mr Ross. In his mindset at that time, Mr Iaconis was his client and there was no reason for him to seek such instructions from Mr Ross. Even on his own version of the conversation, he did not address the only possible reason for seeking instructions from Mr Ross, namely the personal risk for Mr Ross if the loan moneys were drawn down and some of them disposed of in the absence of the acquisition by Equis of any interest in the Units. Mr Ishak did not mention any such conversation with Mr Ross in his first affidavit sworn 8 June 2007 - despite referring in it to the conversation he alleges he had with Mr laconis. He kept no contemporaneous notes, until he reconstructed the history of the transaction on 1 October 2005 once it became apparent that there were serious problems and potential risk for him. His evidence did not manifest a clear recollection of conversations that took place well before he made that note. And there are other matters, referred to elsewhere above and below, that bear adversely on his credit generally.

Inquiries and responses about transfers and Giannikouris

The response to Mr McLoughlin's request about a transfer, referred to above, came in a telephone conversation on 23 June, in which Mr Ishak told Mr McLoughlin that he did not think that Perpetual would receive a transfer by settlement on 24 June. Although Mr Ishak denied this, I have no hesitation in accepting Mr McLoughlin's version, for the following reasons in addition my general reservations about Mr Ishak's credit. Mr McLoughlin recorded his version in a practically contemporaneous email to Mr Downes, which is corroborated by his email record of a follow-up conversation on 24 June, in which Mr Ishak confirmed that transfers would not be handed over on settlement that day. In cross-examination, Mr Ishak at first merely did not recall whether or not he disclosed to Mr McLoughlin that there would be no transfers available, before reverting to outright denial.

In his email to Mr Downes, as well as reporting what Mr Ishak had said to him, Mr McLoughlin added that on settlement Perpetual would deliver all the cheques as directed by the borrower's solicitor "and receive nothing", and offered to send to Mr Downes a copy of Mr Ishak's cheque directions. Mr Downes replied that a copy of the cheque directions would be helpful, adding that he did "not understand why the transfer will not be available" and that he would speak to Mr Ishak about it. (Mr Downes later instructed his subordinate Mr Flegg to make that inquiry.) Mr McLoughlin responded to Mr Downes shortly afterwards, that he thought it "strange not to receive a Transfer".

Still on 23 June, Mr Ishak wrote to Consolidated, setting out the terms of an alleged "agreement", but a cursory perusal of the letter reveals that, as Mr Ishak conceded in cross-examination, "a lot had to happen as things stood at 23 June before there could be a final deal between the parties ready to go".

Also on 23 June, First Title issued its mortgage lending policy of insurance to Perpetual in respect of the two advances. However, First Title incurred no risk under the policy until the loan moneys were advanced, and it is clear from the course of dealing between Mr Downes and Mr McLoughlin on 23 and 24 June that First Title could have countermanded settlement at any time until it took place, and Heidtmans would have complied.

At 3:16pm on 23 June, Mr McLoughlin forwarded, to Mr Downes, Mr Ishak's 23 June cheque directions. Mr Downes says that he reviewed these towards the end of the day, when he noticed the direction for the $185,000 cheque to J & M Giannikouris. At 6:04pm, he forwarded the cheque directions to Mr Flegg and asked him to ascertain from Mr Ishak why there was going to be no transfer, why some of the settlement proceeds were going to Giannikouris, and when the remaining units were being purchased or it was likely that Arab Bank would discharge their mortgages. Mr Downes asked Mr Flegg to also contact Mr Kassem about the first and third of those matters. Although Mr Flegg professes that his best recollection is that he actioned that instruction, his recollection of these matters was generally vague, and in the absence of any record or other evidence of any such inquiry being made, I do not accept that he did so.

On 24 June, at 9:46am, Mr Downes sent Mr McLoughlin an email (with a copy to Mr Flegg), stating that Mr Flegg was "finalising the policy", and adding that First Title was checking with "the vendor's and borrower's solicitors re the transfer issue and will confirm all is in order for settlement once we have spoken with them". Mr McLoughlin responded at 10:19am, asking Mr Downes to confirm by return email when First Title knew whether a transfer for each property would be handed over on settlement and if not, whether Perpetual should proceed without transfers. Mr McLoughlin then had a conversation with Mr Ishak - the terms of which he recorded in an email to Mr Downes, with a copy to Mr Flegg, at 11.16am - in which Mr Ishak said that transfers would not be handed over on settlement, and that he did not think that Elite had prepared or executed them. Although Mr Ishak denied this, again I prefer Mr McLoughlin's version, principally because of his contemporaneous email record, the reliability of which was not challenged.

In his email to Mr Downes, Mr McLoughlin then asked First Title to advise if settlement was to occur without receiving a transfer for each property. At 11:57am, Mr Downes responded to Mr McLoughlin (with a copy to Mr Flegg), that First Title could proceed without a transfer, and was "just waiting for confirmation as to who the Giannikourises are and why there is no transfer, before confirming you can proceed with settlement". Mr Flegg then spoke with Mr Ishak, following which he sent an email to Mr Downes at 12:11pm, recording that Mr Ishak had told him that he was unsure who Giannikouris was, but would check and get back to Mr Flegg within half an hour, and that the transfer had been signed by Equis, but Elite's solicitor would not "have it ready today", and that the transfer "could" be ready by the end of the following week - that is, around 1 July. Mr Flegg was not challenged on this latter aspect, and the accuracy of his record is reinforced by the circumstance that Mr Ishak's statement that Equis had signed the transfer was accurate. Although Mr Flegg was challenged as to the accuracy of his record of the first part of the conversation, relating to the Giannikourises, which Mr Ishak denied, I accept Mr Flegg's version, for the following reasons additional to my general credit reservations. Mr Flegg made a contemporaneous record, by way of his email, and his version is corroborated by a further email he sent only minutes later (at 12:23pm) to Mr McLoughlin, in which he recorded that he had spoken to Mr Ishak and "He is checking on who Giannikouris is and should be getting back to me shortly. As soon as I hear I will let you know ...". And - as evidenced by a further email from Mr Flegg, referred to below - Mr Ishak in fact rang him back, almost exactly half an hour later, just as Mr Flegg asserts he said he would.

At 12:13pm, Mr McLoughlin sent an email to Mr Downes (with a copy to Mr Flegg), confirming that settlement was booked for 2:00pm. Mr McLoughlin added that, if Mr Downes did not think that he would know by then the answers to his outstanding queries relating to the Giannikourises and the absence of transfers, then Mr McLoughlin could postpone settlement until later in the day. At 12:20pm, Mr Downes responded to Mr Flegg's 12:11 email, asking him to update Mr McLoughlin and, once Mr Flegg had heard back from Mr Ishak, to confirm to Mr McLoughlin that settlement could proceed if he was happy with Mr Ishak's explanation. As already noted, at 12:23pm Mr Flegg updated Mr McLoughlin. He then heard back from Mr Ishak, in a conversation that is documented in an email sent by him to Mr McLoughlin (with a copy to Mr Downes) at 12:42pm (31 minutes after Mr Flegg's email relating to his earlier conversation with Mr Ishak, which powerfully corroborates Mr Flegg's evidence that Mr Ishak said in that earlier conversation that he would ring back within half an hour, and that Mr Ishak in fact did so), in which Mr Flegg recorded that Mr Ishak confirmed that the cheque to the Giannikourises was correct and that it related to a previous agreement in place between Equis, the Giannikourises and the "developer", and said that he (Mr Ishak) was comfortable with that arrangement.

Again Mr Ishak denied this conversation, but again I prefer Mr Flegg's version; my reservations about his vague recollection are much diminished in this instance by the availability and consistency of the contemporaneous records. Mr Flegg's version is supported by his contemporaneous record. Mr Ishak in cross-examination spontaneously referred to Elite as "the developer", which was an accurate characterisation, but one which Mr Flegg had no reason to know; there is a high degree of improbability that Mr Flegg, in making his record of the conversation, chanced upon the fact that the vendor was the "developer", and much more likely that Mr Ishak mentioned it, in conjunction with saying that he was comfortable with the arrangement. It is not apparent how else Mr Flegg's record could have come to include a version so far from the truth - as the $185,000 Giannikouris cheque had nothing to do with Equis, and nothing to do with Elite. As Mr Ishak well knew who the Giannikourises were - the vendors to Mr Iaconis of the Maroubra property - these dissembling responses by him to Mr Flegg are seriously adverse to his general credit, and in addition demonstrate intent on his part to mislead First Title into allowing settlement to proceed. At the conclusion of the 12:42pm email, Mr Flegg instructed Mr McLoughlin, "Please proceed with settlement". His evidence that, had Mr Ishak informed him that the cheque for the Giannikourises was for a deposit on a property to be purchased by Mr Iaconis and not for the purchase of the Units, he would have sought confirmation from Mr Downes that the settlement was able to proceed, was unchallenged.

The 24 June settlement

Settlement occurred at about 2:00pm on 24 June at Heidtmans' offices. On behalf of Equis, Mr Ishak attended, accompanied by Mr Williams and Mr Iaconis. Mr McLoughlin represented Perpetual. Mr Ishak understood that only the loan transaction was settling; and Mr McLoughlin was not entirely sure what was settling. There is no doubt that the purpose of the advances then made was intended to be funding the acquisition of unit 1 and unit 2 by Elite. There is also no doubt that Perpetual and First Title knew that no transfer, discharge of mortgage from Arab Bank, or certificate of title were to be delivered. Mr Ishak handed over the cheque directions and certificates of financial advice. Mr McLoughlin handed over and Mr Ishak received cheques, drawn in accordance with Mr Ishak's 23 June cheque directions, in favour of Arab Bank, J & M Giannikouris, Asenhurst, Elite, the Office of State Revenue, and his own firm.

During the period of his dealings with First Title between 15 and 24 June, Mr Ishak appreciated (as he conceded) that whether contracts had or had not exchanged, and whether the purchase of the Units would proceed, was of vital interest to First Title, but he never informed First Title that there was no agreement between Elite and Equis. I am unable to accept his supplementary oral evidence to the effect that he informed First Title that exchange of contracts between Equis and Elite was yet to take place, for the following reasons in addition to my general credit reservations. Most importantly, Mr Downes and Mr Flegg maintained contemporaneous records, which contain no hint of what would have been a matter of great importance to them had it been mentioned. Mr Flegg's evidence - that had Mr Ishak advised him that the sale of the Units was to proceed by way of simultaneous exchange and settlement, then he would have sought confirmation from Mr Downes that the settlement was able to proceed - was not challenged. The focus of First Title's communications with Mr Ishak was the absence of security on settlement, not on the absence of exchange. Mr Ishak, on the other hand, made no contemporaneous record until 1 October, when he prepared a retrospective account in circumstances in which it was becoming apparent that he was at risk, on advice, primarily for his own protection in case anyone pointed the finger at him for any shortcomings on his part. Further, Mr Ishak admitted that he had no accurate recollection of his conversations with Mr Downes on the topic of settlement, and his evidence of these conversations savoured of reconstruction of what he would have done, affected by the influence of hindsight.

After the settlement

Mr Williams took the Asenhurst cheque immediately following the settlement, and on 27 June Mr Ishak forwarded the Giannikouris cheque to the solicitors for the vendor of the Maroubra property. Mr Ishak promptly banked the $50,000 cheque payable to himself, to facilitate payment of his urgent outstanding tax debt, and retained the remaining cheques in his file. In his affidavit evidence, Mr Ishak said that he retained control over the proceeds of the $50,000 cheque in the event that settlement did not proceed. This was quite deceptive, as he had not only banked the cheque but paid the proceeds to the Australian Taxation Office, and reflects adversely on his general credit.

Mr Ishak claimed, in his second affidavit, to have had a conversation with Mr Ross on 24 June, after settlement, in which he informed Mr Ross that "the loan transaction" had taken place, the funds drawn down, that interest was payable from 10 June, and that some of the cheques had been disposed of. Mr Ross denies this, and I am unpersuaded that there was any such conversation.

On 29 June, Fidelity wrote to Mr Ross, informing him that his mortgage had settled on 10 June. Mr Ross says that he had discussions with both Mr Iaconis and Mr Ishak about this news, which he says was alarming to him, and that the conversations presented a conflicting picture. He did not then raise any objection with Mr Ishak.

Perpetual's mortgages were duly stamped, and on 4 July, caveats were prepared and lodged by First Title on behalf of Perpetual, in respect of Units 1 and 2, claiming an interest as mortgagee under unregistered mortgages of each, and containing a statutory declaration by Mr Downes that the caveatable interest claimed by Perpetual was as mortgagee under an unregistered mortgage given by Equis "as purchaser" of the Units.

During July, there were communications and negotiations between Mr Ishak and Consolidated in connection with a proposed Master Deed to govern the purchase of the Units, the remaining three units, and related matters. On 28 July, Mr Ishak wrote to Mr Ross, seeking confirmation of his instructions "in light of the circumstances and the information conveyed to me in our recent telephone conversations ...". Mr Ross responded by a letter dated 29 July but transmitted by fax on 1 August, asserting that settlement had been "exactly contrary to the last set of instructions issued to your firm" and had led to the exposure of Equis, that Equis had issued a specific instruction that there could be no settlement without prior consultation with Mr Ross by Mr Ishak, which instruction had been "ignored, defied or substituted as negligence", and that "If settlement has been effected then it has been with a flagrant disregard to direction" from Equis. It seems from this letter that by this time there had been a falling out between Mr Iaconis and Mr Ross, who had come to appreciate that there was indeed risk for him in the transaction.

Consolidated finally delivered the Master Deed and Ancillary Documents to Mr Ishak on 5 August. This material, which comprised over 100 pages, was returned to Consolidated - albeit in imperfect form - on 14 September.

Between 30 August and 6 October, there were a number of conversations between Mr Flegg and Mr Ishak. Throughout this period, Mr Ishak understood that Mr Flegg's primary interest was to tidy up the matter by getting in the certificates of title, discharges and transfers. On 30 August, in a telephone conversation with Mr Flegg, Mr Ishak said that documents had had to be sent to Italy for execution by the vendor, and that all going well he expected to receive them the following week. The reference to "documents to Italy" was in fact to second mortgages and guarantees, but was calculated to convey the impression that it was a reference to the discharges of mortgage and transfers.

On 2 September, Mr Ishak disposed of the $75,000 cheque drawn in favour of Elite and delivered to him at the 24 June settlement, to Consolidated, as a deposit on all five Vaucluse units.

Also on 2 September, Mr Ross was notified by Resimac that there had been default under his mortgage. He denied responsibility for the loan, and informed Resimac that the loan was "fraudulent". Resimac notified First Title of these developments on 5 September, when Mr Downes, who had just returned from a month overseas, sent an email to Mr Flegg asking him to ascertain from Mr Ishak what was happening with the documents and what was holding up registration. Mr Flegg spoke to Mr Iaconis, who said that arrangements were in hand to transfer funds to clear the arrears. Mr Ishak also told Resimac that such arrangements had been made.

On 7 September, in a telephone conversation with Mr Flegg, Mr Ishak said that Mr Iaconis would be delivering the "documents" to him that afternoon, and that they had to be signed by a third party who would be attending to do so by the end of the week, in anticipation of being able to settle "next Wednesday", namely 14 September.

On 13 September, Mr Ross signed documents, including guarantees and acknowledgements of independent advice, witnessed by Mr Ishak, in connection with the Master Deed. On 14 September, the remaining arrears in respect of the loans were cleared, presumably by Mr Iaconis. In a telephone conversation with Mr Flegg, Mr Ishak said that the "documents" had been signed but needed to be checked by the vendor's (Elite's) solicitor, which was anticipated in 20 minutes, and he was looking to settle on Friday 16 September. Somewhat surprisingly, the allegation of "fraud", and Mr Ross' disowning of the loan transaction, appears to have triggered no further response, with Resimac and First Title apparently placated once the arrears were cleared.

On 16 September, Mr Ishak was instructed, presumably by Mr Iaconis, that the proposed transaction had now changed, and that it was now proposed that "the five units will all be acquired by a new purchaser but that will not proceed prior to Monday 19 September". This would involve transferring funds represented by a bank cheque in the name of Arab Bank for $492,396.49 to Elite personally. Importantly, the proposal no longer involved Equis acquiring the Units: one Mr Hanna was to become the purchaser and, on completion of Mr Hanna's purchase of the Units, Mr Hanna was to reimburse Perpetual for the outstanding loan moneys. The result of this would be that Perpetual's advances to Mr Ross would remain unsecured, and Perpetual's mortgage would remain unenforceable.

On 21 September, Mr Ishak told Mr Flegg that it would be weeks before the matter settled, sought an opportunity to discuss the situation with First Title, and mentioned that his current instructions were "not clear". Mr Flegg reported this conversation - including that Ishak was "talking of weeks" - to Mr Downes. Mr Ishak did not return telephone calls made to him on 23, 26, and 28 September or 4 October, by Mr Downes. On 6 October, Mr Ishak called Mr Flegg, and said that he was still waiting on instructions from Equis and Mr Ross, which had not been forthcoming.

Mr Ishak did not inform Perpetual or First Title that it was now contemplated that Equis would not be the purchaser. Mr Ishak understood at the time that, if First Title was not aware from another source of information about the abandonment of any proposal that Equis purchase the Units, such information would possibly have been regarded by First Title as of importance. First Title could still have caused Perpetual to countermand the unpresented cheques, as Mr Ishak was aware.

In the course of October, Mr Ross terminated Mr Ishak's retainer and required delivery up of the file. On 31 October, Mr Ishak handed his file, containing the remaining unpresented cheques, to Mr Ross, who in turn delivered them to Mr Iaconis. Mr Iaconis forwarded the cheques in favour of Arab Bank to Elite, who banked them on 2 November to the credit of an account with Arab Bank, which collected the proceeds. They have since been withdrawn. Other cheques passed through the hands of Elite, Comlend and others, have passed into currency and become irrecoverable. Comlend went into liquidation in August 2006.

On 14 November, Elite served on Perpetual a lapsing notice in relation to Perpetual's caveats, leading to urgent enquiries by First Title, which ascertained for the first time that contracts had never been exchanged, and the moneys drawn down on 24 June had not been applied towards the purchase.

The Plaintiffs' claims

The proceedings were instituted in 2006, by Perpetual against the Arab Bank and Elite, in which Perpetual endeavoured to recover the proceeds of the cheques. Mr Ishak was later joined in the proceedings as a third defendant, and the original allegations against him were founded on the contract cover-pages, which were said to have conveyed misrepresentations to the effect that contracts had been exchanged. The proceedings against Arab Bank and Elite were settled. The allegations against Mr Ishak were subsequently amended by the addition of further representations, the latest by the fifth further amended statement of claim in May 2010. It is true that it has taken much time and effort and even ingenuity, and seven iterations of the statement of claim, to formulate the claim against Mr Ishak as it was finally put. But even if the Plaintiffs have been, as the Defendant submitted, "casting around for someone to blame and someone from whom to recover", the Court's function is to adjudicate their claim as it is now put.

The Plaintiffs' case against Mr Ishak is founded on the statutory provisions that prohibit misleading and deceptive conduct in trade or commerce. Although the (then) (CTH) Trade Practices Act 1974 ("TPA"), and the (CTH) Australian Securities and Investment Commission Act 2001 ("ASICA"), are also invoked, it suffices to focus (as the Plaintiffs did) on the (then) (NSW) Fair Trading Act 1987 ("FTA"), and in particular ss 42 and 45.

The conduct now impugned falls into two temporal categories, namely that which occurred before 24 June and culminated in the advance of funds on settlement that day; and that which occurred after 24 June and culminated in the omission to stop payment on the cheques before their proceeds were dissipated on or after 30 October.

Perpetual claims that Mr Ishak's conduct in the period culminating on 24 June was misleading and was a cause of its advancing $1.6 million on that date, and that as a result it has lost almost all of that sum (except for those cheques that it was possible to stop, and the amount recovered from the settlement it negotiated with Arab Bank and Elite), which it would not otherwise have advanced. First Title claims that Mr Ishak's conduct in that period was misleading and was a cause of its issuing the policy on 23 June, and authorising Heidtmans to proceed to make the advance on settlement on 24 June, which it would otherwise have countermanded, and that as a result First Title went "on risk" and has become exposed to liability to indemnify Perpetual under the policy, and incurred the costs of investigation - which risk and costs it would not otherwise have incurred.

Both Perpetual and First Title claim that after 24 June and until 30 October, Mr Ishak's ongoing conduct was misleading, and his failure to disclose the change to the proposal involving Mr Hanna, had the consequence that they did not take steps, which they would otherwise have taken, to cause payment on the cheques - the overwhelming majority of which remained unpresented until 30 October - to be stopped, which would have averted all but about $473,000 of the loss.

In addition, as assignee from Mr Ross, Perpetual claims damages for negligence, limited to the amount of the cheques totalling $473,000 that were disposed of between 24 June and 2 September.

The alleged misleading conduct

The Plaintiffs' pre-24 June case of misleading and deceptive conduct was founded on the following representations, said to have been conveyed by Mr Ishak's conduct:

(1) That transfers had been signed ("the Signed Transfer Representation");

(2) That execution by Elite and exchange of contracts had occurred ("the First Representation");

(3) That Mr Ishak held instructions to proceed to settlement of the property purchase transaction ("the Second Representation");

(4) That Mr Ishak had instructions to apply the moneys advanced by Perpetual, in substantial part, to the settlement of the purchase of the Units, shortly after 24 June ("the Third Representation"); and

(5) That transfers would be delivered promptly after 24 June ("the Prompt Transfer Delivery Representation").

In respect of Mr Ishak's conduct after 24 June, it is alleged that the effect of his pre-24 June conduct - in particular the First Representation - continued, and in addition that he engaged in misleading conduct by failing to disclose, following 16 September, that Equis was no longer the intended purchaser of the Units ("the Post Settlement Conduct").

The Signed Transfer Representation

In their final submissions, the Plaintiffs expressly did not press the pleaded case founded on the alleged Signed Transfer Representation. It therefore requires no further consideration.

The First Representation

The First Representation is that Mr Ishak impliedly represented (to Perpetual in the period 19 May to 24 June, and to First Title in the period 15 June to 6 October) that executed contracts for the sale of the Units had been exchanged between Elite as vendor and Equis as purchaser. This representation is said to have been false, as there had been no such exchange.

Section 42 (like its TPA and ASICA analogues) is not confined to misrepresentations: it is contravened if the acts, omissions, statements and/or silence of the defendant, taken as a whole and considered in light of all relevant circumstances, are misleading or deceptive or are likely to mislead or deceive [Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 ("Campbell"), [102]; (2009) 238 CLR 304; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60 ("Butcher"), [104]; (2004) 218 CLR 592]. Conduct is misleading if it induces, or is capable of inducing, error [Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, 198; Rhone-Poulenc Agrochomie SA v UIM Chemical Services Pty Ltd [1986] FCA 218; (1986) 12 FCR 477; Campbell, [25]; Butcher, [111]], and likely to mislead or deceive where there is a real (or not remote) chance or possibility that the conduct will have that effect [Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180, [14]; (1984) 2 FCR 82].

Whether conduct has a tendency to lead into error is an objective question of fact, to be determined on the basis of the conduct of the defendant as a whole viewed in the context of all relevant surrounding facts and circumstances [Campbell, [102]; citing Butcher, [109] (McHugh J: where the conduct involves delivery of a document, the effect of the document must be examined in the context of the evidence as a whole, and the court must have regard to all the defendant's conduct in relation to the document, including its preparation and distribution and any statement, action, silence or inaction in connection with it)]. In this exercise, often called "characterization", the subjective impact of the conduct on the plaintiff is irrelevant, the focus being the objective tendency of the conduct to induce an erroneous assumption on the part of a hypothetical individual, but taking into account the respective positions of the parties, including such matters as their knowledge of each other from previous dealings and their respective familiarity with the subject matter [Sutton v AJ Thompson Pty Ltd (In Liq) [1987] FCA 167, [30]; (1987) 73 ALR 233]. The objective nature of this inquiry means that a finding that conduct is misleading or deceptive is not avoided merely because a plaintiff could by proper inquiries have discovered the misleading or deceptive conduct [Butcher, [111]; Henjo Investments Ply Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40, [40]; (1988) 39 FCR 546 (Lockhart J: it is no answer to say that a plaintiff should have made its own inquiries and that, if it had done so, it would have found out the true position)]. However, this does not create by a side wind an obligation of full disclosure in commercial negotiations [Poseidon Ltd v Adelaide Petroleum NL [1991] FCA 663; (1991) 105 ALR 25, 26; Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458 ("Lam"), 475]. Nor does it mean that a party to commercial negotiations is obliged to volunteer information that will be of assistance to the decision-making of another, or that will avoid the consequences for another (of equal bargaining power and competence) of careless disregard for its own interests [Miller & Associates Insurance Broking v BMW Australia Finance [2010] HCA 31 ("Miller v BMW"), [22]; (2010) 241 CLR 357]. A party that itself independently forms an erroneous impression [Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1993] FCA 630; (1992) 38 FCR 1] or leaps to its own erroneous conclusion [Miller v BMW] is not to be regarded as misled, and failure to make reasonable inquiries may be a relevant circumstance in assessing whether a non-disclosure is correctly characterised as misleading [Miller v BMW, [91]].

Accordingly, the question is whether Mr Ishak's relevant conduct had a tendency, or was likely, to lead Perpetual and/or First Title into the erroneous belief that there were executed and exchanged contracts in respect of units 1 and 2. If it was, it is beside the point that by proper inquiries Perpetual and First Title could have discovered the truth.

Was the First Representation conveyed?

The Plaintiffs accept that Mr Ishak did not expressly say at any point that there were exchanged executed contracts for sale of the Units. Their case is that the following conduct on his part, viewed as whole, had the tendency to lead them into the erroneous state of mind that executed contracts had been exchanged:

First, Mr Ishak's statements to Mr Downes on 15 June, particularly that "settlement fell over last week" because "Arab Bank wouldn't provide discharge", that settlement had been booked for that afternoon, and (in response to the request by Mr Downes to see the contract, title search and valuation) that Heidtmans "have all this";

Secondly, Mr Ishak's conduct on 16 June, in seeking to re-book "settlement" with Mr Downes and in stating that alternative security for Arab Bank was "being progressed";

Thirdly, Mr Ishak's statement to Mr Downes on 22 June, that he was keen to organise settlement "ASAP" (and that Mr McLoughlin should ring Mr Ishak on his mobile phone so that Mr Ishak could provide cheque directions), that the sale of the remaining units should go through in three weeks, and that Arab Bank's discharges should be available in three weeks at the latest;

Fourthly, Mr Ishak's statement to Mr McLoughlin on 23 June that he did not think that transfers would be available to be handed over at settlement the next day - which (as was foreseeable) was passed on to Mr Downes by Mr McLoughlin;

Fifthly, Mr Ishak's statement to Mr McLoughlin on 24 June that transfers would not be handed over on settlement and that he did not think that Elite had prepared or executed transfers - which also (as was foreseeable) was passed on to Mr Downes;

Sixthly, Mr Ishak's statements to Mr Flegg on 24 June, particularly that the transfer had been signed by Equis but "the vendor's solicitor will not have it ready today" and that the transfer "could be available by the end of next week";

Seventhly, the provision by Mr Ishak to Mr McLoughlin (and again passed on to First Title) of the cheque directions for the moneys to be advanced by Perpetual;

Eighthly, Mr Ishak's attendance on and conduct at settlement on 24 June (rather than cancelling it), when he handed over an original of the amended financial advice and cheque directions, and received from Mr McLoughlin on behalf of Perpetual the cheques totalling $1.6 million (less the deductions authorised in the documents signed by Mr Ross on 3 June) - which First Title, although not present at settlement, was aware was occurring;

Ultimately, in the context of the above conduct, Mr Ishak's non- disclosure to the Plaintiffs that exchange of contracts had not occurred and that Equis and Elite were nowhere near reaching consensus as to terms and conditions by which each was prepared to be bound.

Essentially, the Plaintiffs' case is that the above conduct had the capacity and tendency to convey, to Perpetual and to First Title, that contracts had been exchanged, because it was conduct that in the ordinary course of a conveyancing transaction would follow exchange and the existence of an enforceable right on the part of the purchaser - all the moreso where the existence of such an interest was fundamental to the concept of title insurance.

One must be cautious in concluding that conduct that, in the context of a routine transaction, would be merely consistent with contracts having been exchanged, conveys an implied representation that contracts have been exchanged - for at least two reasons. The first is that this was far from a routine conveyancing transaction, most particularly because it involved title insurance - with which none of the parties had any experience in the context of a purchase (as distinct from a refinance). The second reason is that conduct that is consistent with contracts having been exchanged, may also be consistent with contracts not having been exchanged. Conduct, like words, can be capable of bearing multiple meanings, and conduct is not misleading just because it creates confusion [Taco Co of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177]. However, ambiguous words - and therefore conduct - will be regarded as conveying the meaning attributed to them by the representee if (1) it is reasonable for the representee to have interpreted them in that way, (2) it is a meaning that the words (or conduct) are clearly capable of bearing, and (3) it is a meaning upon which it is reasonable for the representee to rely. In Galaxidis v Galaxidis [2004] NSWCA 111, Tobias JA, with whom Giles and Hodgson JJA agreed, said:

[93] In my opinion, the effect of this Court's decision in [Australian Crime Commission v Gray [2003] NSWCA 318] is that even if a representation is insufficiently precise to give rise to a contract (as in the present case), that fact does not necessarily disqualify the representation from founding a promissory estoppel. Much will depend upon the circumstances in which the representation is made and the context against which it is to be considered. In its context, the representation is sufficiently clear and unambiguous if it is reasonable for the representee to have interpreted the representation in a particular way being a meaning which it is clearly capable of bearing and upon which it is reasonable for the representee to rely. In these circumstances, it would be unconscionable for the representor to deny responsibility for the detriment that arises because of that reliance.

[94] On the other hand, if it is not reasonable for the representee to rely on the meaning he attributes to the representation in that had he acted reasonably he would have attributed an innocent meaning to the representation, then it cannot be unconscionable for the representor to deny responsibility for the detriment that the representee sustains because of that unreasonable reliance (original emphasis).

In Sullivan v Sullivan [2006] NSWCA 312, Hodgson JA, with whom McColl JA agreed, said:

[85] Generally, a promise or representation will be sufficiently certain to support an estoppel if it was reasonable for the representee to interpret the representation or promise in a particular way and to act in reliance on that interpretation, thereby suffering detriment if the representor departs from what was represented or promised. Generally, if there is a grey area in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, I see no reason why the Court should not regard the representation or promise as sufficiently certain up to this lower limit.

In my opinion, while spoken in the context of representations that found equitable estoppels, these observations also inform the circumstances in which, for the purposes of the FTA, conduct that is capable of bearing more than one meaning will be taken to convey a particular alleged representation.

The Defendant submits that his conduct ought not be regarded as having conveyed the First Representation, as at no time did the Plaintiffs ask him whether contracts of sale had exchanged, or whether a deposit had been paid, nor did he so advise them; at no time did they ask him to produce, or receive from him, copies of contracts for sale signed by the vendor; while, prior to 24 June, Perpetual and Heidtmans had received from Mr Ishak a copy of the front page of the form of contract of sale, signed by Mr Ross only, no representation was made to the effect that Elite had signed its copy of the contract; and by 24 June, the Plaintiffs were prepared to settle the finance transaction with full knowledge that they would not be receiving certificates of title, discharges of mortgage or memoranda of transfers, because they were not available to be handed over and because the Arab Bank would not relinquish part of its security until it was fully paid.

Because the Plaintiffs' case is founded on a representation allegedly implicit in the impugned conduct, the absence of an express representation, and the failure to make inquiry, does not mean that an erroneous impression was not conveyed by Mr Ishak's conduct. However, the gravamen of the Defendant's submission is that, in the absence of an express representation and inquiry, it was not reasonable for the Plaintiffs to attribute to Mr Ishak's conduct the interpretation that contracts had been exchanged, or to rely on that interpretation, when in the ordinary course one would expect them to make inquiries which would have ascertained the true position - particularly having regard to the context being a conveyancing transaction, in which those taking title are expected to make the appropriate inquiries to protect their position.

Much of the conduct relied on in this case, while consistent with contracts having been exchanged, is not inconsistent with there not having been an exchange, and, in particular, with a proposed simultaneous exchange and settlement - a concept which, while Mr Downes may not have heard of it, is, while exceptional, far from unknown. I do not accept that the prospect of simultaneous exchange and settlement was excluded because the contract provided for a "Deposit" and a "Completion date": contracts are usually prepared initially with a view to exchange in the usual course before settlement, but sometimes subsequently proceed on the basis of simultaneous exchange and settlement; moreover, it is quite clear that simultaneous exchange and settlement was indeed contemplated, at least until about 10 June.

Thus, confirming that settlement was arranged for 10 June and directing cheques payable to Arab Bank, Elite and the Office of State Revenue does not mean that there was necessarily a binding contract in place; such conduct is also consistent with an anticipated simultaneous exchange and settlement. Acknowledgement after 10 June that interest had commenced to run from that date conveys only that, funds having been advanced, interest had commenced to accrue; it does not convey the existence of binding contracts. Mr Ishak's statement on 15 June (in response to the request by Mr Downes to see the "contract, title search and valuation"), that Heidtmans "have all this", in its context, did not necessarily import an executed and exchanged contract. What had been provided to Heidtmans were the front pages of the contracts, signed by the purchaser only, and undated. Thus not only did they not convey that there had been an exchange, but (because they were signed by the purchaser, and undated) suggested if anything that they had not been exchanged. Incoming financiers often wish to see the contract, as Mr Downes explained, to check the particulars and see if there are any "flags", but in the usual transaction, satisfaction that exchange has taken place is not a matter of interest to the incoming financier. Mr McLoughlin had not asked for evidence of a concluded agreement, and the front pages were not provided in response to any such request. Objectively, it would be anticipated that Heidtmans would use the front pages for formal particulars to prepare the mortgages and loan agreements. Neither Mr McLoughlin nor Mr Downes thought that they conveyed that there was an exchanged or concluded agreement.

Booking a settlement, while consistent with contracts having been exchanged, is also consistent with contemplation of a simultaneous exchange and settlement. It is not implicit in suggestions of imminent or urgent settlement that all is in place, or that all pre-conditions to settlement - even exchanged contracts - have been met: because there is another possibility - simultaneous exchange and settlement. The reference to the sale of the remaining units proceeding in three weeks, while suggestive that something in the selling process had happened with the first two units, says nothing as to the status of those sales, and is consistent with their being at any point from payment of a holding deposit, to issue or exchange of contracts, to completion. Execution by the purchaser of transfers can happen before contracts are exchanged, and must in the case of a simultaneous exchange and settlement. And statements to the effect that transfers would not be available on settlement, but could be available within a week or so, are consistent with contracts not having yet been exchanged, as they are with contracts having been exchanged.

Even the issue of the cheque directions, in precise amounts and in favour of the vendor and the vendor's mortgagee - on which the Plaintiffs place great emphasis as creating and/or reinforcing the impression that executed contracts for sale had been exchanged, by reason of their apparent referability to a purchase, being made out to the vendor and vendor's mortgagee and ordinary adjustments, and being calculated down to odd cents referable to the appointed day - does not of itself convey that there were executed and exchanged contracts. This too was consistent with a simultaneous exchange and settlement.

All that said, the usual explanation of the conduct described in the preceding paragraphs would be that contracts had been exchanged, as the alternative explanation of a proposed simultaneous exchange and settlement is exceptional. Moreover, in this case, that conduct is given colour by a number of additional factors.

The first is that, for Mr Ishak to say to Mr Downes on 15 June - in his initial discussion with Mr Downes - that "settlement fell over last week" because "Arab Bank wouldn't provide discharge", had the tendency to convey the impression that the problems with Arab Bank were at least the main reason that settlement had not earlier proceeded, and implicitly that if the problem of the Arab Bank could be overcome, there was no other significant obstacle to completion of the purchase. This had the effect of creating the impression in the mind of a prospective title insurer that all that was outstanding was obtaining a discharge of the Arab Bank mortgage, and obscuring the truth that there was another significant obstacle - namely the absence of consensus, let alone exchanged contracts, between vendor and purchaser. Thus there was created, at the outset of First Title's involvement, the appearance that everything was in place for settlement, save only the problem with the Arab Bank - an impression that was never thereafter dispelled. Mr Ishak agreed that if he had volunteered to Mr Downes that settlement had fallen over the previous week because Arab Bank would not provide a discharge, then he was not "telling the whole story".

The second is that, as was apparent to Mr Ishak, First Title was proceeding on the assumption that Equis would acquire at least an equitable interest on settlement, if not before. Indeed, Mr Ishak not only knew that the question of whether exchange of contracts had occurred would be of vital importance to First Title, but had unsurprisingly been of the view that a title insurance policy permitting a settlement of only the "finance component" was "impossible" in the absence of exchange. In other words, Mr Ishak correctly appreciated that no title insurer in its right mind would accept the risk in the absence at least of exchange of contracts. While I accept that the realisation that certain information may be of crucial importance to another party does not of itself make its non-disclosure misleading, awareness of the other party's state of mind can contribute to a judgment that conduct that tends to confirm that state of mind is misleading, as evaluation of the relevant conduct takes into account what matters of fact each party knew or is to be taken to have known about the other [Butcher].

The third is that, while I do not accept that the provision by Mr Ishak of the 23 June cheque directions conveyed a representation that contracts had been exchanged, it did convey the impression that there would be an exchanged contract by, or contemporaneously with, the settlement. In addition, that cheques were directed and received on 24 June in favour of third parties, rather than in favour of the borrower for investment pending settlement of the property purchase - with the borrower incurring interest in the meantime - suggested that there would upon settlement be an imminent obligation to pay the payees, in particular the vendor and the vendor's mortgagee.

The fourth is that Mr Ishak's response to the Plaintiffs' last minute inquiries about receipt of a transfer on settlement - to the effect that transfers would not be available on 24 June, and that he did not "think" that Elite had prepared them and had them executed, but that they could be available by the end of the following week - was an incomplete answer to the question (which was then of obvious materiality to the Plaintiffs) why there would be no transfer, and obscured the real obstacle to availability of a transfer, namely that there was no consensus between vendor and purchaser, let alone exchange.

The fifth is Mr Ishak's suppression of the true nature of the payment to J & M Giannikouris. Given Mr Ross' undertaking as borrower that the advance would be used only to fund the purchase of the Units, and the Plaintiffs' interest manifested by their inquiry about this cheque, disclosure that it was for the purpose of funding Mr Iaconis' Maroubra purchase and unassociated with the purchase of the Units would have rung alarm bells; passing this payment off as associated with an arrangement with "the developer" with which Mr Ishak was "comfortable" contributed to the impression of orthodoxy.

The sixth is that Mr Ishak attended on settlement, and took delivery of cheques payable to the putative vendor and vendors' mortgagee, which suggested (at least to First Title, who was not represented at the settlement) that Equis would thereupon acquire at least an equitable interest in the Units. At least by this point, there was no longer any prospect of simultaneous exchange and settlement, and there was going to be no settlement of the purchase. It is true that it was known to all parties that transfers were not to be provided, but the combination of the issue of the insurance policy and the provision and receipt of the cheques, drawn in favour of the putative vendor and outgoing mortgagee, point strongly to an impression that upon settlement, if not before, Equis would have at least an equitable interest - an impression which was confirmed, if not created, by Mr Ishak's cheque directions.

Furthermore, Mr Ishak's non-disclosure that exchange of contracts had not occurred was not inadvertent. Where, as here, silence is relied upon as conduct giving rise to a contravention of the FTA, the effect of the silence is considered in light of the relevant surrounding circumstances. An important question in this context is whether the plaintiff was reasonably entitled in all the circumstances to expect that the defendant would make a positive disclosure [Street v Luna Park Sydney Ply Limited [2009] NSWSC 1, [180]; (2009) 223 FLR 245; Demagogue Pty Limited v Ramensky [1992] FCA 557, [3], [33]; (1992) 39 FCR 31]. One such case is where a defendant's knowledge of previous communications between the parties and their overall significance imports an obligation to supplement the earlier information [Lam, 475]. But while silence (or non-disclosure) may in this way always be a circumstance against the background of which a defendant's conduct can be viewed, where the silence or non-disclosure is "not inadvertent", then it itself constitutes not just a background circumstance, but "conduct" within the meaning FTA, s 4(4), in the nature of "refraining" from making the disclosure [Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd [1998] FCA 693; (1998) 155 ALR 714, 722].

While attendance on settlement would have been a breach of duty were it accepted that Mr Ross had given and not countermanded the alleged oral instructions of 3 or 4 June, I am - for reasons already explained - unpersuaded that he gave such instructions. It is true that, on Mr Ishak's own evidence, he did not obtain Mr Ross's consent to the cheques identified in the 23 June cheque directions, totalling around $1.2 million, but in circumstances where Mr Ross had authorised him to act on Mr Iaconis' instructions, he was not obliged to do so.

It does not follow from the finding that Mr Ishak made the First and Third Representations (I have not accepted that the Second Representation was misleading), and that in doing so he engaged in misleading conduct, that Mr Ishak was thereby in breach of any duty owed to Mr Ross. It is not necessarily a breach of duty to one's client (assuming the existence of a duty of care) to make misrepresentations to a counter-party to the transaction.

Causation

Given Mr Ross' reliance on having no personal exposure, it may well be that, had he been apprised of the risks for him personally associated with payment of the cheques amounting to some $473,000 to third parties unassociated with the purchase, he would have withdrawn his support for the transaction. However, where what is relied upon is an absence of advice, that does not of itself establish causation, which requires an element of reliance on Mr Ishak to give the appropriate advice. As already explained, I am unpersuaded that there was any such reliance.

As Perpetual acknowledged, the loss or damage caused by Mr Ishak's breach could not on any view include the cheques handed over by Mr Ishak to Mr Ross on 30 October (or the stopped cheques), and was confined to the amount of $473,523.49, being the sum of the cheques payable to J & M Giannikouris, Asenhurst, Mr Ishak and Elite, which were irrevocably disposed of on or shortly after 24 June. This is because the remainder were disposed of by Mr Ross after they came under his direct control. Yet he did not then act on Mr Ishak's advice to return them to Perpetual - which would have markedly reduced his total potential liability; to the contrary, he handed them over to Mr Iaconis. This powerfully reinforces that he did not rely on Mr Ishak, and that whatever advice Mr Ishak might have given would have made no difference.

Accordingly, Perpetual fails on the Assigned Claim.

Proportionate liability and contributory negligence

Contributory negligence

Fair Trading Act, s 68, while closely analogous to TPA, s 82, has the significant difference that contributory negligence is available as a defence to a claim under s 82, but not to one under s 68. Accordingly, neither Perpetual's nor First Title's claim is liable to be reduced on account of their contributory negligence.

Proportionate liability

(NSW) Civil Liability Act 2002 ("CLA"), Pt IV, relevantly provides as follows:

34 Application of Part

(1) This Part applies to the following claims (apportionable claims):

(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury,

(b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act (as in force before its repeal by the Fair Trading Amendment (Australian Consumer Law) Act 2010) or under the Australian Consumer Law (NSW) for a contravention of section 18 of that Law.

(1A) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind).

(2) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

(3) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1).

(4) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.

(5) (Repealed)

...

35 Proportionate liability for apportionable claims

(1) In any proceedings involving an apportionable claim:

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and

(b) the court may give judgment against the defendant for not more than that amount.

(2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim:

(a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part, and

(b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant.

(3) In apportioning responsibility between defendants in the proceedings:

(a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law, and

(b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings.

(4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings.

(5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise.

A claim for damages under FTA s 68 for contravention of s 42 is an apportionable claim [CLA, s 34], but not one for contravention of s 45. As I have concluded that the conduct that constituted the First Representation was a contravention of s 45 as well as of s 42, neither Perpetual's nor First Title's damages are liable to be reduced by reference to the proportionate liability regime.

However, lest I be wrong in that respect, I shall express a view as to how liability should be apportioned, were the proportionate liability regime applicable. For this purpose it is necessary to consider separately Perpetual's claim and First Title's claim.

In identifying "concurrent wrongdoers", the central concept is that of a single apportionable claim, which directs attention to claims in respect of the same loss or damage - even if the claims are based on more than one cause of action [CLA, s 34(1)(a)]. The judgment of the Court of Appeal in Mitchell Morgan emphasizes (particularly at [41]-[43]) the necessity to identify the particular loss or damage said to be the subject of a single apportionable claim, distinguishing (in that case) the loss suffered by a lender who is fraudulently induced to pay out money (in respect of which it could protect itself and avoid losing the money if it obtained adequate and enforceable security), and that suffered by the same lender in respect of the same loan where it did not obtain such security due to the negligence of its solicitors. While the Defendant pleaded numerous concurrent wrongdoers, most did not cause the relevant loss and damage incurred by Perpetual when it advanced the loan moneys: subsequent conversion of the cheques, even if conversion were established, is a different loss for these purposes. However, on the available evidence, two concurrent wrongdoers contributed to the relevant loss.

The first of them is Mr Iaconis. What Mr Ishak did, he did as an agent for Mr Iaconis, who was his principal. As Brennan CJ, Dawson and Toohey JJ pointed out in Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574 (at 580), principal and agent may be joint tortfeasors where the agent commits a tort on behalf of the principal, as may be employer and employee where the latter commits a tort in the course of employment. That is equally applicable to the concept of concurrent wrongdoers under the proportionate liability regime. Although initially I was troubled by the failure of the evidence to identify contravening conduct on the part of Mr Iaconis personally, once it is appreciated that Mr Ishak was his agent this does not matter. There is no reason to suppose that Mr Ishak was acting other in the course of his instructions, and every reason to infer that he was acting in accordance with Mr Iaconis' instructions. Mr Iaconis is therefore a concurrent wrongdoer.

The second is Heidtmans. Heidtmans were retained to act as Perpetual's solicitors on the transaction, and undoubtedly owed Perpetual a common law duty of care. They failed to inquire whether contracts had been exchanged, or to take any step to confirm that Equis would have an equitable estate upon settlement - steps which a reasonable prudent solicitor for a lender must in the circumstances have taken. In this case, their failure resulted not, as is often the case, in defective or inadequate security (which, on the authority of Mitchell Morgan, is a different loss); rather, it was that the settlement proceeded and Perpetual paid out the loan moneys - the same loss as that for which Mr Ishak is responsible.

In determining the relative responsibility of concurrent wrongdoers for a loss, it is necessary to compare the blameworthiness and causative potency of the conduct of each of them [Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187, [50]-[53]]. Relevant factors include, but are not limited to, which of the wrongdoers was more actively engaged in the activity causing loss, and which was more able effectively to prevent the loss [Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463, [93]-[97]]. Although allowance should be made for the circumstance that the responsibility of one wrongdoer may be relatively increased if it was engaged by the plaintiff specifically for the purpose of guarding against the potential wrongdoing of another (such as a fraudster), there must nonetheless still be a reduction in the liability of the first, as the fraudster is on any view a concurrent wrongdoer, and the fraudster's responsibility may well exceed that of the solicitor. Thus in Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60, Hoeben J apportioned liability 90% to the fraudster and 10% to the solicitor. An almost identical result was reached by Bryson AJ in Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178. In Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, [571]-[600], Young CJ in Eq (as he then was) apportioned responsibility 72.5% to the principal fraudster (Caradonna), 15% to a solicitor who had falsely witnessed a signature (Flammia), and 12.5% to the negligent solicitors - even though a purpose of engaging solicitors was to guard against the conduct of the fraudster. As his Honour said (at [593]-[595]), it would be wrong simply to say that those cases almost compel subsequent courts to reach the same apportionment in similar cases; but they do provide much needed guidance. While his Honour's decision was overturned in Mitchell Morgan, on the ground that there was not a single apportionable claim, it remains valuable in indicating how the relative responsibility of fraudsters and negligent solicitors has been evaluated. With reference to the foregoing decisions, in Kayteal Pty Ltd v Dignan [2011] NSWSC 197, I apportioned liability between a fraudster (47.5%), a grossly negligent valuer (40%) and negligent solicitors (12.5%).

In apportioning responsibility for Perpetual's loss, the relevant factors are:

Mr Iaconis was the principal, the architect of the scam, and a significant beneficiary (in that he obtained the benefit of at least the Giannikouris cheque, and control of most of the other cheques);

Mr Ishak was his agent, and though a beneficiary (in that he obtained the benefit of the $50,000 cheque in his favour) significantly less so than Mr Iaconis. Although the significance of his misleading conduct is increased by his professional status, that is offset by the circumstance that his obligations lay primarily to his client and not to Perpetual, who had their own professional advisers;

Heidtmans were primarily responsible for advising Perpetual and protecting Perpetual's interests. By not inquiring whether contracts had exchanged and not ascertaining that Equis would not have even an equitable estate upon settlement, they manifestly failed to do so. Not only did Heidtmans never ask the critical question, whether contracts had been exchanged: Mr McLoughlin did not turn his mind to that critical question. Mr McLoughlin was uncertain what was settling on 24 June, yet proceeded solely in reliance upon the insurance policy. It is not open to Perpetual to say on the one hand that it has suffered loss (on the basis that its insurance is to be disregarded for that purpose), yet on the other that Heidtmans were not obliged to make further inquiries as it sufficed to rely on the policy. While Mr Ishak's conduct contributed to some extent to Heidtmans' state of mind, their own conduct amounted to a very serious departure from the practices of prudent solicitors acting for lenders in such circumstances.

In my assessment, Mr Iaconis, as the architect and chief beneficiary of the scam, bears the predominant responsibility for Perpetual's loss. The gravity of Heidtmans' departure from prudent practice indicates a significantly higher degree of responsibility vis-à-vis the fraudster than in the cases to which I have referred. Their much more proximate and direct relationship with and obligations to Perpetual would ordinarily indicate that Heidtmans' responsibility for Perpetual's loss exceeded that of Mr Ishak, but that is offset by the circumstances that Mr Ishak derived a direct benefit from the transaction, and that his conduct contributed to Heidtmans' relevant state of mind. If it were relevant to do so, I would apportion liability for Perpetual's loss 50% to Mr Iaconis, 25% to Heidtmans, and 25% to Mr Ishak.

First Title's loss is different, being its exposure to indemnify Perpetual. For the same reasons as given in connection with Perpetual's loss, Mr Iaconis is, in respect of First Title's loss also, a concurrent wrongdoer. The more difficult question pertains to Heidtmans, who were retained by Perpetual and not by First Title - in particular, did Heidtmans owe First Title a duty of care?

It is true that Mr Downes at First Title was himself a solicitor, and that he had his subordinate Mr Flegg make at least some inquiries (for example concerning the Giannikouris cheque). But others he made of Heidtmans, who passed on information to First Title for that purpose. First Title gave Heidtmans "instructions" in connection with settlement, and Mr McLoughlin regarded First Title as able to give him instructions to proceed (or not) with the settlement. While in a sense insured and insurer are counter-parties, this is so only to a limited extent: they also share a common interest, and the insured owes the insurer a duty of utmost good faith. Heidtmans assumed responsibility for ensuring that the insurer's requirements were fulfilled. First Title relied on Heidtmans' certification. First Title was vulnerable to any failure by Heidtmans to use reasonable care to protect the interests of Perpetual on settlement - including ensuring that upon settlement Equis had at least an equitable estate in the Units. It was foreseeable that if Heidtmans allowed settlement to proceed without Equis having an equitable estate, their client Perpetual would suffer loss which in turn might be visited upon its insurer, First Title.

For those reasons, Heidtmans owed First Title a relevant duty of care. For the reasons explained in respect of Perpetual, it breached that duty and, if it were relevant to do so, I would apportion liability for Perpetual's loss also 50% to Mr Iaconis, 25% to Heidtmans, and 25% to Mr Ishak.

Conclusion

My conclusions may be summarised as follows.

I do not accept that the Prompt Transfer Delivery Representation was made, as I cannot be satisfied that Mr Ishak's words conveyed a representation that the transfers would be delivered "in a matter of days".

Mr Ishak's conduct up to the settlement on 24 June had the capacity and tendency to convey the impression that upon settlement Equis had and was granting to Perpetual at least an equitable interest in the land - or in other words, that by settlement contracts had been exchanged. That was misleading in contravention of FTA, s 42. It was also a false representation made in connection with the possible grant of an interest in land concerning the nature of the interest in the land, in contravention of FTA, s 45.

Mr Ishak's conduct, culminating in his attendance on and proceeding with settlement and taking delivery of cheques payable to the putative vendor and vendor's mortgagee, had the capacity and tendency to create the impression that he held instructions to complete the purchase of the Units. However, I do not accept that the Second Representation was falsified, as on balance I am not persuaded that Mr Ross gave any such instruction not to settle without further reference to him, as he claims. It follows that Mr Ishak did not thereby contravene s 42. Even had the Second Representation been false or misleading, it would not have been a contravention of s 45.

Mr Ishak's conduct had the capacity and tendency to convey, to Perpetual and to First Title, that he had instructions to apply the moneys advanced by Perpetual, in substantial part, to the settlement of the purchase of the Units, shortly after 24 June. That representation was false, and accordingly, by making the Third Representation, Mr Ishak contravened s 42. However, the Third Representation was not a contravention of s 45.

While the First Representation continued to have effect after 24 June and until 30 October, I do not accept that the conduct constituted by the (albeit non-inadvertent) non-disclosure of the alternative Hanna proposal was misleading in the circumstances, because there was no reasonable expectation that Mr Ishak, as the conveyancer apparently acting for Mr Ross/Equis, would make a disclosure of confidential instructions that an alternative proposal, which would still see Perpetual repaid, was under consideration, but not yet confirmed.

Mr Ishak's contravening conduct was a cause, though far from the sole cause, of the loss and damage suffered by First Title through its incurring a risk that later materialized, which it would otherwise not have incurred, as had it understood - at any time before the moment the cheques were handed over at the 24 June settlement - that Equis had no equitable interest in the Units, and that there was no imminent obligation or intention to pay the advance in substantial part to the vendor and/or the vendor's mortgagee, First Title would have instructed Perpetual not to hand over the cheques, Perpetual would have complied, and First Title would not have incurred the risk. As in those events Perpetual would not have paid out the loan moneys, Mr Ishak's contravening conduct was also a contributing cause of Perpetual's loss.

Perpetual's damages comprise the loss of $1,481,507.88, and interest thereon from October 2005, less the sum recovered from the settlement of the proceedings against Arab Bank. First Title's damages comprise its exposure to indemnify Perpetual under the title policy, but only to the extent that Perpetual fails to recover its loss or damage in its claims against Mr Ishak in these proceedings, and subject to the limitation that First Title's liability to Perpetual cannot exceed the insured sum of $1.6 million; plus its investigative costs amounting to $161,283.84.

Perpetual fails on the assigned claim, as I do not accept that Mr Ishak owed Mr Ross a relevant duty of care, nor that any pleaded breach of that duty was a breach, nor that Mr Ross relied on Mr Ishak for any relevant advice, nor that any such advice would have caused him to act differently.

As the Plaintiffs succeed under s 45 in respect of the First Representation, proportionate liability does not arise. Had it arisen, Mr Iaconis and Heidtmans were concurrent wrongdoers in respect of both Perpetual's and First Title's claims, and in both cases I would have apportioned responsibility 50% to Mr Iaconis, 25% to Mr Ishak and 25% to Heidtmans.

I direct that the Plaintiffs bring in short minutes to give effect to this judgment.

**********

Decision last updated: 29 June 2012

Medium Neutral Citation:	Perpetual Trustee Company Limited & anor v Peter Ishak [2012] NSWSC 697
Hearing dates:	17, 21, 23, 24, 25, 28 June 2010; 1, 2, 5, 6, July 2010; 27 April 2011
Decision date:	25 June 2012
Jurisdiction:	Equity Division
Before:	Brereton J
Decision:	Defendant engaged in misleading and deceptive conduct in contravention of Fair Trading Act, s 42, and made false representations in connection with potential grant of interest in land as to nature of the interest in contravention of s 45, and thereby Plaintiffs suffered loss. No apportionment between concurrent wrongdoers as proportionate liability does not apply in respect of s 45.
Catchwords:	TRADE PRACTICES - Misleading and deceptive conduct - conveyancer represented to incoming mortgagee that contracts had been exchanged - incoming mortgagee advanced funds where borrower had represented that contracts had been exchanged - Whether conduct misleading or deceptive - Misrepresentation by conduct - (NSW) Fair Trading Act 1987 s 42, 68. TRADE PRACTICES - Misleading and deceptive conduct - conveyancer represented to title insurer for incoming mortgagee that contracts had been exchanged - title insurer accepted risk where borrower had represented that contracts had been exchanged - Whether conduct misleading or deceptive - Misrepresentation by conduct - (NSW) Fair Trading Act 1987 s 42, 68. TRADE PRACTICES - false or misleading representations concerning the nature of an interest in land - whether representation concerned the nature of an interest in land - misrepresentation concerning grant of an equitable interest in land by falsely representing to mortgagee that mortgagor had equitable interest in land - misrepresentation by agents - (NSW) Fair Trading Act 1987 s 45. TRADE PRACTICES - Misleading and deceptive conduct - conveyancer represented to incoming mortgagee that he had instructions to apply funds to purchase of certain real property - Whether conduct misleading or deceptive - Whether representation concerned an interest in land - Misrepresentation by conduct - (NSW) Fair Trading Act 1987 s 42. TRADE PRACTICES - Misleading and deceptive conduct - misrepresentation by non-disclosure - conveyancer acting for purchaser and mortgagee did not disclose that client was contemplating alternative arrangements to purchase property - Whether conduct misleading or deceptive - Whether duty to disclose existed - (NSW) Fair Trading Act 1987 s 42. CAUSATION - Trade practices - Misleading and deceptive conduct -whether contravening conduct a cause of the loss or damages - causal connection established by inference - where title insurer liable to indemnify lender in respect of loan where borrower had no equitable interest in property - where lender insured against risk that materialised - whether insurance operates to extinguish loss - loss to insured caused by misrepresentation to insurer. TORTS - duty of care of conveyancer to client when acting in respect of loan transactions - duty based on responsibility and vulnerability - client acquiesced in conveyancer taking instructions from third party - whether breach of duty by making misrepresentations to counterparty to loan transaction. PROPORTIONATE LIABILITY - Loan and mortgage transaction - Fraudster liable to lender for fraud - conveyancer misrepresented to lender that borrower had equitable interest in property - lender's solicitor liable for failing to make proper inquiries - Whether concurrent wrongdoers - Pt 4 of Civil Liability Act 2002 - Whether acts or omissions caused the same damage or loss the subject of lender's claim - Difference between damage and damages - conveyancer, solicitor, and fraudster concurrent wrongdoers in causing lender to advance loan funds - apportion liability 50% to fraudster, 25% to solicitors and 25% to conveyancer.
Legislation Cited:	(CTH) Australian Securities and Investment Commission Act 2001, s 12DC (CTH) Trade Practices Act 1974, s 53; s 53A; s 82 (NSW) Civil Liability Act 2002, s 34; s 35 (NSW) Fair Trading Act 1987 s4; s 42; s 45; s 68; s 72
Cases Cited:	Arab Bank plc v John D Wood Ltd [2000] 1 WLR 857; Australian Crime Commission v Gray [2003] NSWCA 318; Baiyai Pty Ltd v Guy [2009] NSWCA 65; Benlist Pty Ltd v Olivetti Australia Pty Ltd [1990] FCA 288; (1990) ATPR 41-043; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304; Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178; Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd [1998] FCA 693; (1998) 155 ALR 714; Demagogue Pty Limited v Ramensky [1992] FCA 557; (1992) 39 FCR 31; DigiÂTech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184; Galaxidis v Galaxidis [2004] NSWCA 111; Gardam v George Wills & Co Ltd [1988] FCA 194; (1988) 82 ALR 415; Garvey v Vamamu Pty Ltd [1998] NSWSC 444; (1998) ATPR 41-656; Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60; Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82; Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545; Henjo Investments Ply Ltd v Collins Marrickville Pty Ltd (No 1) [1988] FCA 40; (1988) 39 FCR 546; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109; Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 37 FCR 526; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd [1993] FCA 295; (1993) ATPR 41-249; Kayteal Pty Ltd v Dignan [2011] NSWSC 197; Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458; Lezam Pty Ltd v Seabridge Australia Pty Ltd [1992] FCA 206; (1992) 35 FCR 535; Miller & Associates Insurance Broking v BMW Australia Finance [2010] HCA 31; (2010) 241 CLR 357; Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390; Monroe Topple & Associates Pty Limited v Institute of Chartered Accountants (Aust) [2001] FCA 1056; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191; Port Stephens Shire Council v Booth [2005] NSWCA 323; (2005) 148 LGERA 351; Poseidon Ltd v Adelaide Petroleum NL [1991] FCA 663; (1991) 105 ALR 25; Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; Rhone-Poulenc Agrochomie SA v UIM Chemical Services Pty Ltd [1986] FCA 218; (1986) 12 FCR 477; Street v Luna Park Sydney Ply Limited [2009] NSWSC 1; (2009) 223 FLR 245; Sullivan v Sullivan [2006] NSWCA 312; Sutton v AJ Thompson Pty Ltd (In Liq) [1987] FCA 167; (1987) 73 ALR 233; Taco Co of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177; Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574; Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1993] FCA 630; (1992) 38 FCR 1; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; Watson v Foxman (1995) 49 NSWLR 315; World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181; Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463.
Category:	Principal judgment
Parties:	Perpetual Trustee Company Ltd (First Plaintiff) First American Title Insurance Company of Australia Pty Ltd (Second Plaintiff) Peter Ishak (First Defendant) David Ross (Second Defendant)
Representation:	A Leopold SC, DFC Thomas (plaintiffs) DJ Russell SC, JV Gooley (first defendant) Allens Arthur Robinson (plaintiffs) Maccallum Lawyers (first defendant)
File Number(s):	2006/259941