Xpak Pty Ltd v Scibilia
[2013] VCC 1260
•4 October 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE | Revised (Not) Restricted |
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-12-04579
| XPAK PTY LTD | Plaintiff |
| v | |
| MICHAEL SCIBILIA and OTHERS | Defendants |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19, 20 & 22 August 2013 | |
DATE OF JUDGMENT: | 4 October 2013 | |
CASE MAY BE CITED AS: | XPAK Pty Ltd v Scibilia & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1260 | |
REASONS FOR JUDGMENT
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Catchwords: Loan agreement – Solicitor’s certificate of due execution – Requirement to provide identification by party executing documents to the certifying solicitor – Certificate given after subsequent production of drivers licence but in the absence of the person executing the documents – Whether solicitor’s conduct misleading and deceptive – Section 18 Australian Consumer Law.
Apportionable claim – Whether persons perpetrating the fraud on the lender and on the certifying solicitor were concurrent wrongdoers with the certifying solicitor – Section 87CB Competition and Consumer Act 2010 (Cth) - Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd & Ors [2013] HCA 10 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Ravech | Tisher Liner FC Law |
| For the First, Second and Third Defendants | No appearance | |
| For the Fourth Defendant | Mr M McNamara | Obst Legal, Solicitors |
| For the Fifth Defendant | Mr P Crofts | Ferdinand Zito & Associates |
HIS HONOUR:
1 Michael Scibilia, the first defendant, borrowed $180,000 from the plaintiff in June 2012 to pay business debts. The plaintiff would only lend the money if security were given by charging two properties in the names of both Mr Scibilia and his wife, Mrs Carmel Scibilia. Mrs Scibilia, the fifth defendant, refused her husband’s request to execute loan documents. Mr Scibilia then arranged for an unidentified woman to pose as his wife and to forge her signature on the documentation. The documents were executed before a solicitor employed by the fourth defendant, a firm of solicitors in Glenroy. The solicitor certified the due execution of the documents, believing the woman with Mr Scibilia to be his wife.
2 The loan was guaranteed by two companies through which Mr Scibilia carried on business, the second and third defendants. The second defendant has been deregistered and the third defendant is in liquidation. The plaintiff did not seek leave from the appropriate courts to proceed with the claims against those defendants. The first defendant did not attend the hearing. His solicitor, on the first morning of the trial, was given leave to file a Notice of Ceasing to Act. The first defendant did not participate in the trial.
3 The evidence concluded on 20 August 2013. The evidence established that Mr Scibilia had borrowed the sum of $180,000 from the plaintiff, had received that sum or the payment of benefits made at his direction, and was indebted to the plaintiff for the principal sum and interest. I entered judgment on that day for the plaintiff against the first defendant.
4 Mrs Scibilia gave evidence at the trial denying that she had signed the loan documentation or had ever met with the solicitor who witnessed her purported signatures and certified due execution. On 20 August 2013, at the conclusion of the evidence, plaintiff’s counsel, Mr Ravech, informed the Court that the plaintiff would not proceed with its claim against the fifth defendant. Fourth defendant’s counsel, Mr McNamara, informed the Court that the fourth defendant would not contend that Mrs Scibilia had signed the documentation.
5 Accordingly, I entered judgment for the fifth defendant against the plaintiff that the plaintiff’s claim be dismissed and I made orders on the fifth defendant’s counterclaim that certain caveats lodged by the plaintiff in respect of properties owned or partly owned by Mrs Scibilia, be removed.
6 The issues remaining in the case, apart from questions of costs and further relief against the first defendant in relation to security he had provided to the plaintiff, concerned the plaintiff and the fourth defendant. Those issues were:
a. whether the fourth defendant through its employee solicitor had, by signing the certificate of due execution of the documentation by Mrs Scibilia, participated in conduct which was misleading and deceptive in breach of section 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth));
b. if the fourth defendant were liable to the plaintiff, whether the claim by the plaintiff against the fourth defendant was an apportionable claim within the meaning of section 87CB of the Competition and Consumer Act 2010 (Cth);
c. whether Mr Scibilia and/or the unidentified woman were concurrent wrongdoers and, if so, how should responsibility be apportioned in order to determine the quantum of the fourth defendant’s liability to the plaintiff.
Background facts
7 Mr Scibilia arranged the loan from the plaintiff through a financial agent, Mr Michael Chan of the AMG Group. The plaintiff’s solicitors advised Mr Chan on 31 May 2012 that the loan documents were ready for collection. Mr Scibilia later picked up a bundle of documents together with a letter addressed to Mr and Mrs Scibilia dated 31 May 2012. The letter concluded: “Please have these documents explained by your solicitor in accordance with the solicitor’s certificates and have your solicitor execute same. Once you have executed all the abovementioned documents, please have them returned to our office”.
8 The documents were returned to the plaintiff’s solicitors on 5 June 2012. The documents were not, however, properly executed. Some documents had not been signed and the solicitor’s certificates had not been completed. Mr Scibilia attended the plaintiff’s solicitors’ office and collected the documents on the afternoon of 5 June 2012. They were returned “executed correctly” to the plaintiff’s solicitors on the morning of 7 June 2012. On that day, and on the days that followed, the loan funds totalling $180,000 were distributed in accordance with the provisions of the loan deed.
The events on 5 June 2012
9 It is necessary to examine in detail the events on 5 June 2012. Sometime that day, probably in the morning, Mr Scibilia took the documents to the fourth defendant and saw an employee solicitor. The solicitor had been admitted to practice in October 2008. She had previously worked at the Financial Ombudsman’s Office for nearly three years and later, at the Glenroy firm since October 2011. She left that employment in June 2013.
10 She gave evidence at the trial that on the morning of 5 June 2012 she was asked to see “walk in clients”. The firm had not previously acted for them. The male client introduced himself as Michael Scibilia and the woman as his wife, Carmel Scibilia. They had some social conversation relating to Mr Scibilia’s involvement in the fruit and vegetable industry. During the meeting, the interaction between Mr Scibilia and the woman was friendly and affectionate and there was nothing in their conduct to excite any suspicion on the part of the solicitor that the woman was not Mrs Scibilia, or that the real Mrs Scibilia was not a willing party to the transaction.
11 The loan documentation was executed by Mr Scibilia and the woman, and their signatures were witnessed by the solicitor. There were about 20 documents signed by Mr and Mrs Scibilia. The solicitor asked them to produce identification. She said she “asked for their drivers licences”. Mr Scibilia produced his licence and the solicitor had a photocopy taken of it. The woman said that she did not have her licence but could return with it later that day. The solicitor completed the solicitor’s certificates, including having Mrs Scibilia acknowledge her receipt of a copy of the certificate. However, the solicitor retained that certificate pending the production by “Mrs Scibilia” of her drivers licence. All the other executed documents, including the solicitor’s certificate in respect of Mr Scibilia, were returned to him.
12 That afternoon, the solicitor was with other clients. She was called to reception to see Mr Scibilia. He had returned with Mrs Scibilia’s licence. The solicitor said in evidence that she asked him “why Carmel hadn’t returned”. Mr Scibilia said that his wife was unwell. The solicitor’s evidence was that in the morning Mrs Scibilia had “appeared tired and she didn’t look very well”. The solicitor said she then sighted the licence “to ensure that it was the same person who had been there that morning”.
13 In cross-examination, the solicitor said that the licence was in the name “Carmel Scibilia” and that she “checked the signature on the licence and compared it with the signature” of Mrs Scibilia on the solicitor’s certificate at the place where Mrs Scibilia acknowledged receiving a copy of the certificate. The solicitor did not take a copy of the drivers licence.
14 On 19 August 2013, by arrangement between the parties, the solicitor attended Court and met the real Mrs Scibilia. The solicitor, when asked in evidence whether she identified Mrs Scibilia as the woman who had attended her office on 5 June 2012, said, “It does appear that it was her, based on my memory of the person that presented to my office”.
15 This evidence is unlikely to be correct. The parties before me accepted that the real Mrs Scibilia had not met with the solicitor or signed documents before the solicitor on 5 June 2012. I have reached a similar conclusion, for the following reasons:
a. the evidence of Mrs Scibilia, which was tested in cross-examination by Mr McNamara for the fourth defendant, was entirely credible;
b. Mrs Scibilia gave evidence that;
i. she had not attended the fourth defendant’s offices or seen the employee solicitor on 5 June 2012 or at any other time and had not signed the loan documents;
ii. she had asked her husband to leave the matrimonial home on 27 May 2012 after arguments over money and requests that she further encumber properties in respect of which she had an interest. Her husband had left home on that date and had not returned;
iii. on 27 May 2012, she had discovered text messages on her husband’s mobile phone, including a message from a woman which read, “How did you go with the documents, sweetie?”;
iv. some weeks previously, at her husband’s request, she had given him her drivers licence, apparently to show a solicitor, so that loan documents could be prepared for her consideration;
v. the licence had been returned to her about two weeks before her husband left the matrimonial home;
vi. she was able to account for her movements during the day on 5 June 2012. These movements were not compatible with having attended the solicitors’ office in Glenroy;
c. a handwriting expert studied the loan documents purportedly signed by Mrs Scibilia on 5 June 2012 in 11 places and compared them with six documents actually signed by Mrs Scibilia, including her drivers licence. He concluded that, “It is clear that the questioned Carmel Scibilia signatures are not genuine signatures of this writer typical and representative of the writing habits of same” and that, “it is my opinion that it is highly probable that Carmel Scibilia is not the writer of the questioned signatures in this name”.
Claim against the firm of solicitors
16 The plaintiff sued the fourth defendant on the basis that its employee solicitor’s conduct was:
a. within the scope of her authority;
b. misleading and deceptive in contravention of s.18(1) of the Australian Consumer Law.
17 The plaintiff relied upon a number of “representations” contained in the solicitor’s certificate which it alleged were false, namely that:
a. the solicitor had explained to Mrs Scibilia, before she signed the documents, the general nature and effect of the documents, including the risk of loss of any security property and her other assets;
b. the solicitor had informed Mrs Scibilia that the solicitor was not expressing an opinion nor advising on the viability of the transaction or Mrs Scibilia’s ability to make the required payment to the plaintiff and that if Mrs Scibilia had any doubt on these matters then she should obtain independent financial advice before signing the documents;
c. following the explanations given by the solicitor, Mrs Scibilia had stated to the solicitor that she understood the general nature and effect of the documents and was signing them freely, voluntarily and without pressure;
d. Mrs Scibilia had produced her drivers licence to the solicitor as evidence of her identification as the appropriate person to sign the documents.
18 The plaintiff claimed as damages the loss of the principal sum and the loss of the use of the principal sum. This latter claim was expressed as the loss of interest pursuant to the loan deed during the period the principal sum remained in default. The solicitor’s certificate was in the standard form recommended to solicitors by the Legal Practitioners Liability Committee. The form is an appendix to the document, Managing Mortgage Risk – Amadio and beyond - February 2010 prepared by the Committee.
19 The Legal Practitioners Liability Committee was established by section 234 of the Legal Practice Act 1996 (Vic), and continued by operation of section 6.6.1 of the Legal Profession Act 2004 (Vic). The statutory function of the Committee is to “carry on the business of providing professional indemnity insurance to law practices [and] to undertake liability under contracts of professional indemnity insurance” (section 6.6.3, Legal Profession Act 2004 (Vic), as set out in Part 6.6 of the Act).
20 Mr Michael Fetter, the solicitor who prepared the documents for the transaction on behalf of the plaintiff, has practiced in the area of property and finance law as a solicitor for 25 years. He said that the Legal Practitioners Liability Committee distributed documents to legal firms “all the time”, providing guidance to solicitors and advice on processes. The document Managing Mortgage Risk was a document used by solicitors performing legal work for the providers of mortgage finance.
21 The solicitor who provided the certificates on 5 June 2012 said in her evidence that, although she was not familiar with the document Managing Mortgage Risk, she was, from her previous experience working in the office of the Financial Ombudsman, familiar with documents associated with loans secured by mortgages and that she was generally familiar with the incidence of mortgage fraud, the High Court decision of Commercial Bank of Australia v Amadio and the responsibilities of a solicitor executing a solicitor’s certificate in the form of Appendix 1 to the document Managing Mortgage Risk. This included the need to properly explain the loan documents to the client and the need to obtain proof of identification.
22 The introduction to the document Managing Mortgage Risk contains the following statement:
“Mortgage Fraud
Given the recent rise in mortgage fraud claims, we have introduced a chapter on this subject. We identified the common themes that recur in fraud claims seen at LPLC. This will help you to spot potential fraud before it occurs and prevent you from becoming an unwitting participant in a mortgage fraudster’s scheme”.
23 In the document, under the heading “Chapter 1: Amadio Claims, Solicitor Certificate Claims”, is the following statement: “A solicitor’s certificate in any transaction necessarily increases the risk of a claim being made against you because it positions you for liability if the security provider is able to challenge the contents of the certificate”.
24 Under the heading, “LPLC Recommended Procedure”, the first matter recommended is to “ask for identification and record the evidence produced”. The document continues: “Fraud is increasingly common and title deeds can fall into the wrong hands. We have seen cases where the person introduced as the borrower’s nearest and dearest is actually the borrower’s partner in crime. Asking for identification need not be embarrassing or offensive. It is just a sound principle of doing business. Keep a copy of the identification provided”.
25 The solicitor gave evidence that, based on her memory, the person she met in Court by arrangement between the solicitors on 19 August 2013, was the person she met in her office on 5 June 2012 and who said she was Mrs Carmel Scibilia. I am satisfied, for the reasons stated earlier, and also the concessions made at the conclusion of Mrs Scibilia’s evidence by counsel for the plaintiff and counsel for the fourth defendant, that the solicitor’s certificate prepared by the solicitor in relation to Mrs Scibilia is false in each of the respects claimed by the plaintiff. The woman who signed documents in front of the solicitor was not Mrs Scibilia and neither Mrs Scibilia, nor the woman posing as her, had produced a drivers licence.
26 Further, I am satisfied that the following statements are also false:
a. the certificate states in “Part E Identification of persons signing documents” that a drivers licence “was produced to me by the borrower” as “evidence of identification”. “The borrower” is defined in the certificate as Carmel Scibilia. The licence was produced by Michael Scibilia and not by Carmel Scibilia or by the person who purported to be Carmel Scibilia;
b. at the meeting with Mr Scibilia and the unidentified woman on the morning of 5 June 2012, the solicitor completed the document even though she had not received the drivers licence for Mrs Scibilia. The solicitor also required the woman to sign the “client’s certificate” at the foot of the second page of the document certifying that the signatory, Mrs Scibilia, had “been handed a copy of the certificate”. In fact, the solicitor said that she had retained the certificate and did not hand it over until Mr Scibilia returned in the afternoon with what he said was his wife’s drivers licence.
27 This is clearly a case where the solicitor made an honest mistake and was herself the victim of the fraud by Mr Scibilia and the unidentified woman who accompanied him to the solicitor’s office on 5 June 2012. However, the circumstances in which the certificate was prepared do not excuse the solicitor or her employer from the consequences of the certificate which contained a number of false statements.
28 This is not a claim in negligence. However, it is appropriate to record the circumstances of the preparation of the certificate which demonstrate a failure to take reasonable care. These include:
a. not requiring the production of the drivers licence or other evidence of identification at a time when the relevant borrower was present so that a direct comparison could be made between the photograph on the drivers licence and the physical appearance of the borrower as she presented herself to the solicitor, particularly in circumstances where the solicitor was not previously acquainted with the borrower and the meeting with her may have been limited to about 45 minutes;
b. the solicitor apparently made a file note of her meeting with Mr and Mrs Scibilia. It is clear, however, that the file note was not prepared contemporaneously as it refers to events which happened in the meeting in the morning with both Mr and Mrs Scibilia, and in the afternoon when “Michael attended office with Carmel’s licence. I sighted and provided certificate”. No evidence was given as to when this document was prepared;
c. the solicitor failed to take a copy of the licence produced as Mrs Scibilia’s licence in the afternoon. This makes it difficult to be confident of what was produced to her and therefore the reasonableness of any “memory” the solicitor had of the woman who had taken part in the consultation in the morning;
d. the signatures on the documents signed by the unidentified woman on 5 June 2012 are reasonably consistent and appear quite different to the ordinary signature of Mrs Scibilia, including the signature on her drivers licence. This licence had apparently been issued 8 years earlier in 2004;
e. although the solicitor became aware of the allegation of fraud within a few days and had conversations with Mr Fetter, the solicitor acting for the plaintiff, on 14 June 2012 she said in evidence that she had not at any time prepared a memorandum or statement setting out a description of the woman present in the conference with her on 5 June 2012. In her evidence, the only matters of description the solicitor gave of the woman were that she was of average height, petite with “browny blonde” hair which she did not remember as being short, and as wearing jeans and a white jacket.
29 In my view, the fourth defendant is responsible for the conduct of its employee solicitor in signing the certificate. The falseness of the statements contained in the certificates constitute misleading and deceptive conduct in contravention of the Australian Consumer Law.
30 In the circumstances, it is appropriate to assess the plaintiff’s damages as including the loss of principal of $180,000.
Interest
31 In addition, the plaintiff claimed the default interest pursuant to the loan agreement at the rate of 25% per annum. The plaintiff is entitled to be put back in the position it would have been, but for the conduct of the fourth defendant. There was no evidence adduced by the plaintiff as to whether this interest would have been available at that time from other borrowers.
32 The plaintiff said that, but for the fourth defendant’s conduct, it would not have lent money to the first defendant. In these circumstances, without further evidence of the loss of use of the money advanced, the plaintiff is not entitled to rely upon the default interest rate contained in the loan agreement.
33 Nettle JA, delivering the primary judgment of the Court of Appeal in St George Bank Limited v Quinerts Pty Ltd [2009] VSCA 245; (2009) 25 VR 666 (“St George Bank Limited v Quinerts”) at paragraph 25 stated that, for the plaintiff to be placed in the same position, so far as money can do it, as if the contract had been performed, the incurring of such losses must be proved.
34 Counsel for the plaintiff conceded that interest at this rate will not be recoverable as against the fourth defendant, as the loss suffered by the plaintiff was the advancement of $171,000 relying upon the representations of the solicitor, not the expectation of interest should the lender default on the loan. The plaintiff is, however, entitled to statutory interest on the recovered sum.
Apportionment claim
35 The fourth defendant contended that, if liability were established against it, the first defendant and perhaps also, his female companion on 5 June 2012, should be considered as concurrent wrongdoers for the purposes of Part VIA of the Competition and Consumer Act 2010 (Cth), and that any liability the fourth defendant may have to the plaintiff should be determined after responsibility for the plaintiff’s damage or loss has been apportioned.
36 The position of the unidentified woman is not significant. She acted at the request and direction of the first defendant. If they were both to be treated as concurrent wrongdoers, it would be inappropriate to consider the conduct of the woman independently of the first defendant or to apportion greater responsibility to them because there were two fraudsters acting in concert rather than a single malefactor.
37 Section 87CB of the Competition and Consumer Act 2010 (Cth) provides that Part VIA “applies to a claim if the claim is a claim for damages made under section 236 of the Australian Consumer Law for economic loss…caused by conduct that was done in contravention of section 18 of the Australian Consumer Law”.
38 The plaintiff claimed the fourth defendant contravened s18(1) of the Australian Consumer Law by falsely representing that the fifth defendant was the signatory of the loan deed. The factual basis of the claim was that the employee solicitor’s conduct involved a failure to take reasonable care. In reliance on the solicitor’s representations, the plaintiff advanced money which it has been unable to recover, thereby causing it economic loss. In the circumstances, the claim can be considered an apportionable claim.
Identification of the plaintiff’s damage or loss
39 French CJ, Hayne and Kiefel JJ, the majority of the High Court in Hunt & Hunt v Mitchell Morgan [2013] HCA 10; (2013) 296 ALR 3 (“Hunt & Hunt”) stated at paragraph 19, that there are two questions posed by the relevant New South Wales legislation for the Court to consider in apportioning liability between concurrent wrongdoers, namely, “What is the damage or loss that is the subject of the claim? Is there a person, other than the defendant, whose acts or omissions also caused that damage or loss?”
40 In the present case, the loss or damage to the plaintiff’s economic interest is, first, advancing money when it would not otherwise have done so, and secondly, not having the benefit of security for the repayment of the money advanced.
41 Plaintiff’s counsel submitted that for the claim to be able to be apportioned, it must be the same damage arising from the same cause of action as in the action against the fourth defendant. He submitted that the losses claimed against the first defendant and the fourth defendant were different. The loss against the first defendant was the consequence of the first defendant’s default under the loan agreement, whereas the loss against the fourth defendant was the loss arising from the plaintiff’s inability to recover from the fifth defendant because she was not bound by the loan agreement.
42 Mr Ravech referred to the approach taken by Young CJ in Eq in Vella v Permenant Mortgages Pty Ltd [2008] NSWSC 505 (“Vella”). Vella was the case at first instance determined by the High Court in the appeal of Hunt & Hunt. Young CJ in Eq had apportioned the liability of the solicitors Hunt & Hunt, with concurrent wrongdoers, Mr Flammia and Mr Caradonna. In a related proceeding, Young CJ in Eq allowed Hunt & Hunt to recover from Mr Flammia the damages (as apportioned) that Hunt & Hunt had been ordered to pay the plaintiff, Mitchell Morgan.
43 This recovery was permitted notwithstanding section 36 of the Civil Liability Act 2002 (NSW) which provides that:
“A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:
(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant), and
(b) cannot be required to indemnify any such wrongdoer”.
44 Mr Ravech submitted that the decision of Young CJ in Eq was made on a claim “which was in terms similar to the claim for misleading and deceptive conduct made by the plaintiff against the fourth defendant” and that the legal basis for the decision remains good law following the High Court’s decision in Hunt & Hunt.
45 In Hunt & Hunt at paragraph 21, the majority accepted that “in some cases the acts or omissions of wrongdoers may result in different damage to the same plaintiff”. This statement was made in the same paragraph as reference to section 36 of the Civil Liability Act 2002 (NSW).
46 However, in the passages of the judgment which follow, dealing with, “the damage or loss”, the majority judges were critical of the articulation by Giles JA in the Court of Appeal of the difference between the “losses the subject of the claims for economic loss against Messers Caradonna and Flammia and the loss the subject of the claim for economic loss against Hunt & Hunt” (paragraph 29).
47 The claim by Hunt & Hunt against Mr Flammia, for recovery of the apportioned damages it was ordered to pay the plaintiff, was not before the High Court for its determination upon the appeal. Further, the majority judgment appeared to be critical of both the New South Wales Court of Appeal’s decision and the approach by the Victorian Court of Appeal in St George Bank Pty Ltd v Quinerts Pty Ltd. I also do not consider that the facts of the present case are on “all fours” with the facts in Hunt & Hunt to make it inevitable that a similar decision should follow in the present case as that made by Young CJ in Eq at first instance in Vella.
48 In my view, I should strictly follow the two step approach laid down by the High Court in Hunt & Hunt. The first step is to identify “the damage or loss that is the subject of the claim” against the fourth defendant (paragraph 19). As the majority said at paragraph 24, “it is necessary to bear in mind that damage is not to be equated with what is ultimately awarded by the court, which is to say the “damages” which are claimed by way of compensation and are assessed and awarded for each aspect of the damage suffered by a plaintiff”.
49 The majority continued, “Damage, properly understood, is the injury and other foreseeable consequences suffered by a plaintiff. In the context of economic loss, loss or damage may be understood as the harm suffered to a plaintiff’s economic interests”. The majority had, earlier in the judgment at paragraph 19, stated that, ““Damage” is not a defined term [under the Civil Liability Act], but damage to property and economic loss are included in the definition of “harm” in s5”. To be an apportionable claim, the relevant “harm” must be “damage to property and economic loss which results from a failure to exercise reasonable care and skill”.
50 The majority noted that in the appeal before the Court, “Mitchell Morgan’s [the plaintiff’s] pleading does not expressly state the loss and damage it claims to have suffered. However, it claims that the loss and damage is continuing and that it has lost the sum advanced, together with interest and other expenses. Taken together this might suggest that Mitchell Morgan claims to be unable to recover those moneys”.
51 The second question posed by the legislation is whether the fraudsters’ conduct, independently of the misleading and deceptive conduct by the solicitor, caused the loss suffered by the plaintiff.
52 The majority in Hunt & Hunt commented in regard to causation that, “in March v Stramare (E & MH) Pty Ltd, it was observed that courts are no longer constrained as they once were to find a single cause for a consequence and to adopt an ‘effective cause’ formula. Courts today usually recognise that there may be wrongdoers whose acts or omissions occur successively, rather than simultaneously, and who may be liable for the same damage, even though one may be liable for only part of the damage for which the other is liable” (at paragraph 56).
53 Both section 87CB of the Australian Consumer Law and the common law acknowledge that a wrongdoer’s acts may be independent of another wrongdoer yet cause the same damage. At paragraph 28, the majority considered that, “The harm to Mitchell Morgan’s economic interest was that it is unable to recover the sums advanced. That is its loss or damage for the purposes of s.34(2). Mitchell Morgan’s plea that it continues to suffer the loss and damage is explicable on the basis that it continues to be unable to recover those sums”.
54 The majority considered, at paragraphs 29 and 30, the identification by Giles JA in the Court of Appeal of the plaintiff’s “loss and damage, the harm to its economic interests” as being “in the one case paying out money when it would not otherwise have done so, and in the other case not having the benefit of security for the money paid out”. The majority said that these matters “cannot be equated with [the plaintiff’s] loss and damage as they were the “immediate effects of the fraudster’s conduct and of the negligence of Hunt & Hunt” and therefore were relevant to the issue of causation; the second question posed in paragraph 19 of the judgment.
55 The majority at paragraph 35 was similarly critical of the approach of the Court of Appeal in St George Bank Ltd v Quinerts where Nettle JA “characterises the loss or damage caused by the borrower and the guarantor on the one hand and the valuer on the other hand as different by reference to two circumstances, neither of which can be equated with loss or damage”. At paragraph 76 of St George Bank Ltd v Quinerts, Nettle JA considered that, “The loss or damage caused by the borrower and the guarantor was their failure to repay the loan. Nothing which Quinerts [the valuer] did or failed to do caused the borrower or the lender to fail to repay the loan. The damage caused by Quinerts was to cause the Bank to accept inadequate security from which to recover the amount of the loan. Nothing which the borrower of the lender did or failed to do caused the Bank to accept inadequate security for the loan”.
56 Nettle JA’s identification of the loss and damage caused by the valuer as “the bank taking inadequate security” was considered by the majority in Hunt & Hunt as “the immediate effect of the valuer’s negligence” and therefore was “properly to be seen as a step in causation of damage, as it was in this case” (paragraph 35).
57 In St George Bank Ltd v Quinerts, Nettle JA at paragraphs 78 and 79 said that Young CJ Eq’s conclusion in Vella, that “the fraudster was a concurrent wrongdoer in relation to [the plaintiff’s] claim against the solicitors”, “is at odds with my conclusion”. The majority judgment in Hunt & Hunt, after referring to Nettle JA’s discussion of a hypothetical case, stated that Nettle JA “appears to have assumed that there is some requirement that one wrongdoer contribute to the wrongful actions of the other wrongdoer in order that they cause the same damage. There is no such requirement in Part 4 of the Civil Liability Act. To the contrary, Part 4 acknowledges, as does the common law that a wrongdoer’s acts may be independent of those of another wrongdoer yet cause the same damage” (paragraph 41).
58 It is evident that both the fraud committed by the first defendant and the unknown woman, and the fourth defendant’s failure to take the appropriate steps which would have prevented the fraud, were acts that led to the plaintiff being both unable to recover the principal sum from the fifth defendant and to secure repayment of the sum by the lodging of mortgages over the first and fifth defendant’s properties. If the plaintiff had not been confident that the fourth defendant had successfully identified the signatory of the loan deed as being Mrs Scibilia, the funds would not have been advanced by the plaintiff. Both the fraud of the first defendant and his female accomplice, and the subsequent misleading and deceptive certification by the solicitor, were causes of the plaintiff’s loss.
59 In Hunt & Hunt, the majority judgment stated, “There is no express limitation on the nature of the claim which might have been brought by the plaintiff against a concurrent wrongdoer, except the requirement of s 34(2) that the acts or omissions of all concurrent wrongdoers have caused the damage in question” (paragraph 18).
60 The first defendant and the unknown woman engaged in the tort of deceit and breached statutory prohibitions against misleading and deceptive conduct in trade or commerce. They made false representations about the unknown woman’s identity and forged the fifth defendant’s signature in order to induce the plaintiff to advance funds for the purpose of paying expenses associated with the first defendant’s business. The plaintiff would therefore have causes of action against the first defendant and the unknown woman.
61 The effect of the fraudsters’ conduct was that the plaintiff was induced to enter into a loan agreement under which it is unable to recover against one of the parties, as her signature was a forgery. It follows that, despite the solicitor’s role in the plaintiff’s loss, the fraudsters’ conduct must be seen to have contributed to, and to therefore be a cause of, the plaintiff’s inability to recover.
Apportioning responsibility
62 Although the plaintiff’s claim against the fourth defendant has been successful, it would not be consistent with the intention of Part VIA of the Consumer and Competition Act for the fourth defendant to be held liable for the whole of the plaintiff’s loss in circumstances where concurrent wrongdoers were also involved. Regard must be had to the first defendant’s and the unknown woman’s conduct in contributing to the loss suffered by the plaintiff. If the first defendant and his accomplice were also responsible for the loss or damage, the plaintiff should not recover from the fourth defendant any more than that for which it was responsible.
63 Counsel for the plaintiff and the fourth defendant have submitted how the loss claimed against the fourth defendant should be apportioned. The plaintiff relied on the New South Wales Court of Appeal case of Graham v Hall [2006] NSWCA 208 (“Graham v Hall”) and submitted that in similar circumstances to the present case, a solicitor who was deceived into approving mortgage documents by a fraudster and a “malicious” and “dishonest” Justice of the Peace, was held to be responsible for 60% of the plaintiff’s loss.
64 Counsel for the fourth defendant submitted that Graham v Hall can be distinguished from the present case as the fraudster in Graham v Hall was not a party to the claim as the proceedings were brought after his death and therefore his conduct could not be considered in apportioning responsibility between the solicitor and the Justice of the Peace. Mr McNamara submitted that the appropriate apportionment would be in the order of 10-15%, similar to Young CJ in Eq’s apportionment between the fraudsters and the solicitors in Hunt & Hunt at first instance.
65 Mr Scibilia clearly is the most morally blameworthy of the wrongdoers as he was the architect of the fraud. The unknown woman’s forgery of Mrs Scibilia’s signature was significant, however her role in the fraud was merely as an instrument in Mr Scibilia’s scheme. Both counsel agreed that in apportioning the loss, Mr Scibilia and the unknown woman should be considered together as “fraudsters” rather than allocating specific responsibility to each individual or a greater responsibility to them as individuals than would be the case if the first defendant were considered alone.
66 As stated by CJ Young in Eq in Vella, “The assessment of the percentages by which the loss or damage must be apportioned is, of necessity, a matter for judgment and is not a matter of scientific exactitude” (paragraph 591). However, also cited was what Rolfe AJA (with whom Sheller & Fitzgerald JJA agreed) said in Vinidex Tubemakers Pty Ltd v Theiss Contractors Pty Ltd [2000] NSWCA 67 at [29], that “the Court must make a comparison of the culpability and of the acts of the parties causing damage and, thus, to the relative blameworthiness of and the relative causal potency of the negligence of each party…”.
67 The first defendant and the unknown woman’s actions should be regarded very seriously as they involved fraud and criminal conduct. The fourth defendant was an unwitting contributor to the plaintiff’s loss. However, the solicitors should bear a high degree of culpability as their employee failed to take the reasonable care and skill expected of a solicitor, particularly in identifying the female signatory of the loan documents. The procedures to be followed when a solicitor’s certificate is given are well known to solicitors and are also set out in the recommendations of the relevant statutory body published for the guidance of legal practitioners. Proper identification of signatories is an important part of the processes necessary to protect lenders from the type of fraudulent activity which occurred in this case.
68 The certifying solicitor’s role is interposed at the stage of execution of loan documents to ensure that, so far as possible, the risk of fraud is minimised. Graham v Hall demonstrated the high culpability attributed to a solicitor who “expressly took upon himself the duty of taking reasonable steps to protect [the mortgagee’s] interests” (paragraph 114).
69 In these circumstances, I consider that responsibility for the damage should appropriately be apportioned as to 50% to the first defendant and 50% to the fourth defendant.
Orders
70 I will hear further from the parties, including the fifth defendant, as to the appropriate orders to be made.
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Certificate
I certify that these 20 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 4 October 2013.
Dated: 4 October 2013
Philippa Gilkes
Associate to His Honour Judge Anderson
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