Ginelle Finance Pty Limited v Diakakis & Ors

CATCHWORDS : NEGLIGENCE - Claimant owner of house - claimant's signature forged on mortgage documents - liability of solicitor acting for claimant on mortgage - liability of solicitor who attested the forged signatures - duty of care of solicitors in those circumstances - whether policy of insurance issued by Lawcover responded to claim by solicitor attesting the forged signatures - apportionment of liability between solicitors - causation under s5D of the Civil Liability Act (2002) (NSW).

Ginelle Finance Pty Limited - Plaintiff Michael Diakakis - Defendant Michael Diakakis - 1st Cross-Claimant to the First Cross-Claim Ginelle Finance Pty Limited - First Cross-Defendant to the First Cross-Claim Dennis P Grogan and Lewis J Webb t/as Grogan & Webb - Second Cross-Defendants to the First Cross-Claim Peter J Cassimatis - Third Cross -Defendant to the First Cross-Claim Michael Diakakis - Second Cross-Claimant Jennifer Diakakis - First Cross-Defendant to Second Cross-Claim Nikita Diakakis - Second Cross-Defendant to Second Cross-Claim Terry Diakakis - Third Cross-Defendant to Second Cross-Claim Dennis P Grogan and Lewis J Webb t/as Grogan & Webb - Third Cross-Claimants PARTIES : Peter Cassimatis - First Cross-Defendant to Third Cross-Claim Jennifer Kiakakis - Second Cross-Defendant to Third Cross-Claim Nikita Diakakis - Third Cross-Defendant to Third Cross-Claim Terry Diakakis - Fourth Cross-Defendant to Third Cross-Claim Peter J Cassimatis - Fourth Cross-Claimant Dennis Grogan and Lewis Webb t/as Grogan & Webb - Fourth Cross-Defendants to Fourth Cross-Claim Peter J Cassimatis - Fifth Cross-Claimant; Jennifer Diakakis - First Cross-Defendant to Fifth Cross-Claim Nikita Diakakis - Second Cross-Defendant to Fifth Cross-Claim; Terry Diakakis - Third Cross-Defendant to Fifth Cross-Claim Peter Cassimatis - Sicth Cross-Claimant Lawcover Pty Limited - Sixth Cross-Defendant

J Harris SC/ J Stewart - Defendant/First Cross-Claimant COUNSEL : SA Kerr/B Arster - Second Cross-Defendant/Third Cross-Claimant Peter Nagle - Third Cross-Defendant/Fourth Cross-Claimant D Davies SC/PA Horvath - Sixth Cross-Defendant

John S Zouroudis & Co - Defendant/First Cross-Claimant SOLICITORS : Thomson Playford - Second Cross-Defendant/Third Cross-Claimant Michael Abboud - Third Cross-Defendant/Fourth Cross-Claimant Phillips Fox - Sixth Cross-Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10151/2002 - GINELLE FINANCE PTY LIMITED v Michael DIAKAKIS First Cross-Claim: Michael DIAKAKIS - First Cross-Claimant to the First Cross-Claim; GINELLE FINANCE PTY LIMITED - First Cross-Defendant to the First Cross-Claim; Dennis P Grogan and Lewis J WEBB t/as GROGAN & WEBB - Second Cross-Defendants to the First Cross-Claim; Peter J CASSIMATIS - Third Cross-Defendant to the First Cross-Claim Second Cross-Claim: Michael DIAKAKIS - Second Cross-Claimant; Jennifer Diakais - First Cross-Defendant to Second Cross-Claim; Nikita DIAKAKIS - Second Cross-Defendant to Second Cross-Claim; Terry DIAKAKIS - Third Cross Defendant to Second Cross-Claim Third Cross-Claim: Dennis P GROGAN and Lewis J WEBB t/as GROGAN & WEBB - Third Cross-Claimants; Peter CASSIMATIS - First Cross-Defendant to Third Cross-Claim; Jennifer DIAKAKIS - Second Cross-Defendant to Third Cross-Claim; Nikita DIAKAKIS - Third Cross-Defendant to Third Cross-Claim; Terry DIAKAKIS - Fourth Cross-Defendant to Third Cross-Claim Fourth Cross-Claim: Peter J CASSIMATIS - Fourth Cross-Claimant; Dennis GROGAN and Lewis WEBB t/as GROGAN & WEBB - Fourth Cross-Defendants to Fourth Cross-Claim Fifth Cross-Claim: Peter J CASSIMATIS -Fifth Cross-Claimant; Jennifer DIAKAKIS - First Cross-Defendant to Fifth Cross-Claim; Nikita DIAKAKIS - Second Cross-Defendant to Fifth Cross-Claim; Terry DIAKAKIS - Third Cross-Defendant to Fifth Cross-Claim Sixth Cross-Claim: Peter CASSIMATIS - Sixth Cross-Claimant; LAWCOVER PTY LIMITED - Sixth Cross-Defendant

JUDGMENT 1 HIS HONOUR: Nature of Claim On 5 November 2002 Studdert J entered summary judgment in favour of the plaintiff and gave leave to issue a Writ of Possession against the defendant in respect of the property known as 259 Botany Street, Kingsford (hereafter referred to as "the property"). His Honour ordered that the defendant's cross-claim against the plaintiff be struck out. Those proceedings were contested and were heard on 4 and 25 October 2002. His Honour made an order for costs in favour of the plaintiff against the defendant. 2 This judgment relates to the balance of the proceedings. These comprise the claim by the defendant/first cross-claimant (hereafter referred to as "Mr Diakakis") against two solicitors - Dennis P Grogan and Peter J Cassimatis. He alleged that Mr Grogan failed to exercise due care and skill in acting on his behalf as mortgagor of the property in respect of two mortgages dated 19 October 2001 in favour of Permanent Custodians Limited and Ginelle Finance Pty Limited. Against Mr Cassimatis it was alleged that he had purported to witness Mr Diakakis signing mortgages and other documents and had purported to explain those documents to him when in fact he had not done so. 3 The claim against the family members asserted that unknown to Mr Diakakis, they had fraudulently procured the registration of the mortgages over the property and the advancement of monies thereunder. The cross-claims by the solicitors against those relatives alleged the same matters. Lawcover had refused to indemnify Mr Cassimatis and that was the basis of his cross-claim against it. The solicitors cross-claimed against each other. Factual background

4 In order to understand the nature of the claims, it is necessary to set out in some detail the various loan transactions affecting the property leading up to the two mortgages of 19 October 2001. Except as otherwise indicated, I find the background facts to be as set out in the following paragraphs. Two folders of documents were tendered by consent. Reference to documents is by folder number and page number, e.g. document 2 - 15 is page 15 in folder 2. 5 Mr Diakakis was born in Greece on 14 September 1940. He attended school in Greece and left at the age of fourteen. Thereafter he performed labouring work, except for two years when he was in the Greek Army. He came to Australia in January 1964. He remained in steady employment thereafter. He retired in 1988 after 22 years as a painter and tiler with Johnson Tiles. 6 He married on 9 January 1966 and had three children - Nikita born 27 March 1969; Phillip born 16 December 1970 and Terry born 8 July 1976. His wife Sylvia died on 3 September 1984.

7 On 14 June 1970 he purchased the property jointly with his wife. In order to do so he borrowed $25,000 from the Commonwealth Bank and the property was mortgaged accordingly. That mortgage was discharged in 1975. In 1980 a further $25,000 was borrowed from the Commonwealth Bank to carry out extensions to the house and again a mortgage was entered into. That mortgage was discharged in 1988.

8 From 1988 Mr Diakakis was in receipt of unemployment benefits until he underwent a triple bypass operation on his heart in 1994. Thereafter he received the Disability Support Pension. On 20 September 1997 his son Terry was married to Jenny Davies. Jenny was his niece, being the daughter of his wife's sister.

9 It was the evidence of Mr Diakakis that he had little command of the English language and could neither read nor write English. He said that he could read his name and the names of other members of his family in English and could write his name and that of his wife in English. He said that his wife had a better command of English than he did and that she was the one who gave instructions to solicitors and the like in relation to the mortgages of the property until the time of her death. It was she who interpreted correspondence for him. It was his wife's sister who filled out his application for the disability pension. Following the death of his wife, it was his children who interpreted correspondence for him.

10 I formed the opinion that his knowledge of English was rather better than that. I accept that he might have difficulty in understanding a solicitor's letter, or correspondence from a lender where technical issues were raised. In day to day communications, however, I was of the opinion that he was reasonably fluent in English. This conforms with the observations of Mr Cassimatis and Mr Grogan.

11 In relation to his evidence in these proceedings, I thought that he was being deliberately evasive during parts of his cross-examination. Having said that, a partial explanation for his inability to answer questions directly was his tendency to deal with matters in concrete terms, rather than conceptually. I am, however, satisfied that at the time of these transactions, i.e. 2000 - 2001, Mr Diakakis had a sufficient/knowledge of English to understand when mortgages and loan documents were explained to him, in particular, key concepts such as the amount of the mortgage, the length of time of the mortgage, the amount of monthly repayments and the consequences of a failure to repay monies under the mortgage as and when required. The comment which he said he made to Mr Grogan (affidavit, 4 August 2004, para 31) illustrates this: "If they do not pay the loan in one year do you take my home in Kingsford? Make sure if there is any trouble that they have to sell their house." 12 In January 2000 Mr Diakakis was approached by his son, Nikita, and his daughter-in-law, Jenny, who asked him for a loan of $55,000. Although he did not have that amount of money, he agreed to mortgage the property for that amount on condition that they service the loan and that the money was repaid within a year. In the course of undertaking that transaction, Mr Diakakis attended the office of Mr Cassimatis (he conducted his practice from home) and was accompanied by Nikita and Jenny. 13 I do not accept that the discussion with Mr Cassimatis took place wholly in the Greek language. I find that in accordance with my observation of Mr Diakakis and in accordance with the evidence of Mr and Mrs Cassimatis the conversation took place partly in English and partly in Greek. I also do not accept that the discussion took place mainly between Mr Cassimatis on the one hand and Jenny and Nikita on the other with Mr Diakakis being only peripherally involved. I find that the mortgage was explained to Mr Diakakis by Mr Cassimatis and that Mr Diakakis understood the effect of the transaction, ie that unless loan repayments were maintained and the loan was fully repaid, he would lose the property. I accept that Mr Diakakis signed the mortgage and other documents in the presence of Mr Cassimatis on this occasion.

14 The details of this mortgage transaction were as follows: The mortgage was dated 15 February 2000. The mortgagee was AAA Financial Services Pty Limited. The amount of the mortgage was $55,000. Mr Cassimatis acted on behalf of Mr Diakakis in the transaction. The monies advanced under the mortgage were applied as follows: "AAA Financial Services Pty Limited: Establishment fees (interest brokerage) $11,310. Office of State Revenue (stamp duty) $171. J Diakakis $43,519." 15 It was the evidence of Mr Diakakis (affidavit, 4 August 2004, para 30) that in March 2000 he was asked by Jenny and Nikita to accompany them to a solicitor's office. He said that he thought that the purpose of the visit related to the original mortgage and was surprised to find that he was being asked to enter into a new mortgage for an increased amount of $90,000. He said that he protested but eventually agreed to enter into the mortgage and sign the documents necessary to effect it. Mr Grogan acted on his behalf in this transaction and it was his office to which Mr Diakakis was taken. 16 Mr Grogan had no recollection of the specific matters referred to in para 31 of the affidavit of Mr Diakakis of 4 August 2004. He specifically denied that he ever winked at Jenny Diakakis. His recollection was that he spoke with Mr Diakakis in English, explained the mortgage documents, the nature of the transaction and his obligations under it and that Mr Diakakis appeared to understand the explanation. I accept the version of Mr Grogan. 17 I found Mr Grogan to be a most impressive witness. I formed the opinion that he was doing the best he could to accurately inform the Court about the various transactions with which he was concerned. If there were some kind of disagreement between Mr Diakakis on the one hand and Jenny and Nikita on the other about entering into a new mortgage, it did not occur in the presence of Mr Grogan. I find that nothing occurred in the presence of Mr Grogan to indicate that Mr Diakakis was unwilling to enter into the mortgage and that by the time he attended the offices of Mr Grogan he had agreed to do so. 18 From the point of view of Mr Grogan, in the light of later events, the circumstances leading up to this transaction are important.

19 Mr Grogan was admitted as a solicitor in 1970. Thereafter he gradually built up a significant conveyancing practice specialising in mortgages. He had a number of clients who loaned money on the basis of first and second mortgages. As a result he frequently received approaches from finance brokers.

20 On 15 February 2000 he received a facsimile from AAA Finance Services Pty Limited asking whether he had a client prepared to advance $90,000 with the property as security. The author was Mr Pecotic. A valuation and a letter of offer were attached. Upon receipt of that material, Mr Grogan approached one of his clients, Mr Impey, inquiring whether he could provide the funds required. Mr Impey subsequently advised that he could lend the funds, but he wished another firm of solicitors to act on his behalf in the transaction. 21 When this was communicated to AAA Finance Services Pty Limited, Mr Pecotic requested that Mr Grogan act on behalf of Mr Diakakis and advised that Mr Diakakis wished him to communicate solely through Jenny Diakakis, his daughter in law. Thereafter day to day instructions in relation to the matter were received by telephone from Jenny Diakakis. The only time Mr Grogan came into personal contact with Mr Diakakis was in late February 2000 when he had a conference with him to explain the loan and mortgage documents.

22 The details of this mortgage were as follows: It was dated 3 March 2000. The mortgagee was Harold Neil Impey. The amount of the loan was $90,000. Mr Grogan acted on behalf of Mr Diakakis. The loan monies were applied as follows: AAA Financial Services Pty Limited (repay loan) $55,750.00 J Diakakis $32,047.18.

23 The next transaction occurred on 23 August 2000. It involved a variation of the mortgage to Mr Impey by increasing the amount of the loan from $90,000 to $105,000. It was the evidence of Mr Diakakis that he signed an authority for monies to be paid to Jenny Diakakis (document 2-032) but that he did so only because Jenny had told him that the solicitor had made a mistake and he needed to sign it. He denied that he signed any other documents associated with that transaction and denied that he attended the office of Mr Cassimatis for the purpose of enabling Mr Cassimatis to witness the variation of mortgage. (Documents 2-037, 2-038.) The variation of mortgage was registered and the additional funds of $14,609.79 were paid to J Diakakis. Mr Cassimatis apparently acted on behalf of Mr Diakakis.

24 In support of the plaintiff's case a number of documents were examined by Michelle Novotny, a handwriting expert. I found her analysis of the documents to be persuasive and convincing. She was not cross-examined to suggest that her conclusions were in any way incorrect. I accept her conclusions as to what documents were signed by Mr Diakakis and as to those which were not. 25 Her opinion presents a problem for Mr Diakakis in relation to this transaction. One of the documents which formed part of it was a statutory declaration, pursuant to s11 of the Consumer Credit Code, dated 21 August 2000, (document 2-031). Ms Novotny's conclusion in relation to the two apparent signatures of Mr Diakakis on that document was that it was possible that the top signature was his and that it was highly probable that the bottom signature was his. In my opinion, both signatures. are those of Mr Diakakis. In relation to the variation of mortgage, the comments of Ms Novotny were somewhat equivocal. 26 On the basis of that evidence, I am not persuaded that Mr Diakakis was tricked into signing the authority to pay directed to Jennifer Diakakis. I am satisfied that Mr Diakakis knew about this transaction. The fact that he signed the statutory declaration dated 21 August 2000, leads me to believe that he also signed the variation of mortgage. In my opinion, Mr Diakakis was aware of this transaction and consented to it. 27 I do not know whether Mr Diakakis actually attended Mr Cassimatis to enable him to witness the statutory declaration and the variation of mortgage. 28 It was the evidence of Mr Cassimatis that on this occasion Mr Diakakis attended his residence but that the documents were already signed when this occurred. In those circumstances all that he did was to have Mr Diakakis acknowledge his signatures on them. Mr Diakakis denied that he ever saw Mr Cassimatis again after their first meeting on 15 February 2000. For reasons which I will explain in due course, I accept the evidence of Mr Cassimatis and his wife that Mr Diakakis did attend at the home of Mr Cassimatis more than once, although I am not sure whether he did so on this occasion. Because of the findings which I have made in relation to later transactions, it is not necessary to reach any final conclusion on that issue for this transaction. 29 Another transaction took place in relation to the property on or about 12 October 2000. This comprised a non-registered second mortgage securing an amount of $50,000. The mortgagee was AAA Financial Services Pty Limited, which protected its interest in the property by the filing of a caveat. The monies from that transaction were applied as follows: AAA Financial Services Pty Limited (establishment fees, interest, brokerage) $9,150 Angus Begg (legal fees) $2,772.50 J Diakakis $37,925.

30 In his evidence Mr Diakakis agreed that all of the documents associated with that transaction were signed by him. He could not recall instructing Mr Cassimatis to act on his behalf and he could not recall attending Mr Cassimatis for the purpose of signing the loan agreement and mortgage and receiving independent legal advice.

31 I have concluded that Mr Diakakis did consent to this transaction and was aware of its implications. In the absence of a clear denial that he attended Mr Cassimatis in relation to this transaction (affidavit, 4 August 2004, para 45) I accept the evidence of Mr Cassimatis and of Mrs Cassimatis that Mr Diakakis did so attend. In his affidavit (28 October 2004, para 42) Mr Cassimatis said that he could not recollect whether Mr Diakakis signed the documents in front of him or whether he brought the documents to him already signed. In his evidence at trial, it was the recollection of Mr Cassimatis that except for 15 February 2000, on the occasions Mr Diakakis attended he usually had documents with him which had already been signed. The difficulty with the evidence of Mr Cassimatis was that due to his state of health, it was rather vague when pressed as to specific detail. In that regard his recollection may well have been better at the time when he swore his affidavits. 32 Before proceeding further I should say something about Mr Cassimatis. He was admitted as a solicitor in 1979. He described himself as suburban sole practitioner with a small, mainly conveyancing practice. He worked from home, the address of which was 39 Rainbow Street, Kingsford. He was diagnosed with Parkinson's disease in September 2002. It is common ground that Parkinson's disease is a neurological degenerative disease which creates slow but gradual paralysis. It can cause shaking of the limbs, communication and memory problems. It was clear when Mr Cassimatis was giving his evidence that he was adversely affected by this disease. At the time when he gave evidence Mr Cassimatis no longer held a practising certificate as a solicitor.

33 The next transaction affecting the property took place on 3 November 2000. This comprised a mortgage over the property for $200,000 to Albert Ling as mortgagee. Mr Cassimatis acted on behalf of Mr Diakakis and Mr Grogan acted on behalf of the mortgagee. Nikita appeared on the documents as a co-borrower and guarantor. The loan monies were applied as follows: Grogan & Webb (Costs, establishment fee and disbursements) $11,295.10 Joe Abboud $45. Nugent William & Carter $385. Angus Begg $495. Mr Impey $106,814.05. AAA Financial Services Pty Limited $50,440 T Diakakis $30,525.85

34 Mr Diakakis accepted that he had signed all documents associated with this transaction except the document dated 1 November 2000 entitled "Consent by Borrower/Guarantor to Legal Advice" (2-056). Ms Novotny examined this signature and concluded that it was possible that it was the signature of Mr Diakakis. Given that all of the other documents associated with the transaction were signed by Mr Diakakis, I find that he also signed this document. 35 The evidence of Mr Diakakis in relation to this transaction was that in late October 2000, he was visiting a friend in a take-away shop called "Valencia" when he was approached by Nikita and Jenny. Jenny said: "Sign these documents. It is for $25,000. We're going to give $25,000 to AAA to reduce the principal and that would leave $75,000 outstanding." Mr Diakakis said that he gave Nikita his driver's licence, signed all the documents which were placed in front of him without reading them or understanding them. He apparently did not notice the figure of $200,000 which appeared on some of the documents.

36 Mr Diakakis said that some three weeks later a letter came to the property and was read to him by another son, Phillip. Mr Diakakis could not remember where the letter came from, except that it referred to a $200,000 loan. Mr Diakakis took the matter up with Jenny and said to her: "What is this $200,000?" to which she replied, "This is a mistake. Leave me alone". Mr Diakakis took no further action.

37 Mr Diakakis denied that he saw Mr Cassimatis in relation to this transaction and denied that anything was explained to him by Mr Cassimatis concerning the transaction.

38 In a statement made to the police on 9 November 2001 (exhibit 2A) a somewhat different version of how the transaction arose was given: "14. About 20 February 2000 I received a letter dated 18 February 2000 from AAA Finance from Mr Jason Pecotic. I did not understand what this letter was about as I cannot read English. I speak and read Greek only. I can read numbers as they are the same as Greek. I contacted my son Phillip and he came to my house.

15. My son rang for me and he found out that the loan had now gone to $200,000. 16. After I received that letter Nikita and Jenny came down and saw me. They asked me to sign lots of other papers. They had a cheque from the St George Bank for $25,000. They said that they wanted the interest rate to drop down and that is the reason they want me to sign the papers. They tell me "no trouble". 17. These papers like the others were written in English. I signed them. I have no idea what I signed for that day. Both of them asked me for my driver's licence so that they could photocopy it. They took my licence with them and I Understand that they went and colour photocopy it in Kent Street in the city. The then brought my licence back to me." 39 Phillip Diakakis gave evidence in the proceedings. In his affidavit sworn 5 September 2006 he referred to this transaction as follows: "18. At a time I cannot recall my father told me that whilst he was at his friend's take-away shop, Nikita had asked him to come outside as they had papers for him to sign. I also recall that my father mentioned that they showed him a cheque for $25,000. I telephoned Mr Cassimatis, solicitor, at about that time at the request of my father. I said to him words to the following effect "My name is Phillip Diakakis, Michael Diakakis' son. I'm inquiring about the loan he's got." He said to me words to the following effect, "You are not my client and it is none of your business." I said, "Thankyou" and hung up." 40 In a statement made to the police on 9 November 2001 (exhibit D), Phillip Diakakis said in relation to this transaction: "4. About 20th February 2000, my father rang me up at about 4-4.30pm and he asked me to read him a letter he got in the mail. I went home and I read a letter from AAA Finance Services dated 18 February 2000. 5. I read the letter and I did not understand why this was sent to my father. This letter was a thank you for using their business to secure mortgage finance. I spoke with my father and he told me that he had only authorised a loan for Nikita and Jenny for $90,000 the year before. 6. I telephoned AAA Finance and spoke to Jason Pecotic. I asked him what this was all about. Mr Pecotic told me that my father owed $200,000 to the solicitor. I told him that my father only owed $90,000. Mr Pecotic stated that someone had taken out a loan to $200,000. He asked me who I was and I told him I was Michael Diakakis' son. He refused to tell me anymore. Although he did ask me if I was Jenny's husband." 41 In his evidence at trial, Phillip Diakakis said that the first time he had spoken to Mr Pecotic was in October 2001 (T.67.41) and that back in 2000 and 2001 he had not heard of AAA Finance (T.68.36). Under cross-­examination the following evidence was given: "Q. And when you saw the amount of $200,000, that concerned you; is that correct? A. Yes. Q. Because as far as you knew there was only $90,000 that had been borrowed from AAA? A. Yes. Q. Did you ring Mr Jason Pecotic? A. Yes I did. Q. And you had a conversation with him? A. Yes I did. Q. Putting it in his words and your words, can you remember what you said to him? A. He just reassured me and said that everything was OK and if they borrowed again they would take the house. Q. He told you there was $200,000 owed to a solicitor? A. No. Q. He didn't tell you there was $200,000 owed by your father to anyone? A. He told me that they had taken out a loan for $200,000 but he didn't tell me who they owed it to.

Q. You told him that you were Michael Diakakis' son? A. That's correct. Q. And he asked you something about were you Jenny's husband and you said no? A. That's correct. Q. And you were very concerned by this amount of $200,000 over this property? A. Yes that's correct.

Q. That's where you were living? A. Yes. Q. Living with your father? A. Yes.

Q. And Nikita? A. That's correct.

Q. Were you so concerned about a mortgage going from $90,000 to $200,000 that you would get in your car and drive out and speak to Mr Pecotic? A. No.

Q. Did you go and see Mr Cassimatis, a solicitor, in February 2000 and ask him what it was all about? A. No. Q. Did you go and ring Jenny and Terry and ask them what it was all about in 2000? A. No. Q. Did you ask Nikita what it was about in 2000? A. Yes. Q. And what did Nikita say? A. He told me - well, he didn't tell me anything." (T.71-72)

42 I find the version of events given by Mr Diakakis and Phillip Diakakis in respect of this transaction to be incredible. There are a number of clear contradictions in the evidence. Quite clearly, the letter of 18 February 2000 from AAA to Mr Diakakis is irrelevant. It refers to a totally different transaction. What Mr Diakakis and Phillip Diakakis seem to be asserting is that something occurred in October 2000 (clearly not the receipt of the letter of 18 February 2000) which caused them to make inquiries which revealed that contrary to Mr Diakakis' belief the property was mortgaged for $200,000 not $90,000. If that evidence is accepted, then it must have been clear, if not to Mr Diakakis then certainly to Phillip Diakakis, that some fraud had been practised against his father which directly affected the property. No doubt he would have explained that to his father. Despite that knowledge, neither of them took any action to either seek an explanation or to have the money returned. 43 This seeming lack of interest or urgency is to be contrasted with the actions of Mr Diakakis and Phillip Diakakis on 2 November, 2001 when they received notification that the property was mortgaged for $371,000. Not only did they urgently seek an explanation from Nikita and Jenny Diakakis, but when they were not satisfied with their response, they reported the matter to the police on 9 November 2001. Had they become aware (as they assert) in October 2000 of a similar situation, ie an unauthorised increase in the mortgage over the property from $90,000 to $200,000 it can be inferred that they would have acted in the same way. The lack of reaction strongly suggests that Mr Diakakis was well aware of the Ling mortgage for $200,000.

44 I am not satisfied that Mr Diakakis was misled into signing the mortgage and other loan documents which enabled the mortgage in favour of Mr Ling to be registered and the loan monies provided. I find that Mr Diakakis was aware of this transaction and that he knowingly signed the documents associated with it with the intention of increasing the mortgage liability over the property to an amount of $200,000. In that regard it needs to be kept in mind that all the mortgages taken out in respect of the property up to and including the Ling mortgage, had apparently been adequately serviced. There is no suggestion that any payments had been missed. This is despite the high rate of interest specified in some of those mortgages. There was nothing to suggest to Mr Diakakis that such a situation would not continue for the future. 45 I am also satisfied in relation to this transaction that Mr Diakakis did attend Mr Cassimatis. I am satisfied that Mr Cassimatis explained the documents to him. I am also satisfied that the loan and other documents were already signed by Mr Diakakis but that he acknowledged them in the presence of Mr Cassimatis as Mr Cassimatis has deposed to in his affidavit of 28 October 2004 (para 45-57). Although the diary note made by Mr Cassimatis refers to "J Diakakis" I am satisfied that Mr Diakakis also attended Mr Cassimatis' office on 1 November 2000.

46 I find that as of 3 November 2000, Mr Diakakis was aware of and had consented to all of the transactions affecting the property,: which had occurred between 15 February 2000 and 3 November 2000. He had signed all the necessary loan documents and had certainly attended the office of Mr Cassimatis on a number of occasions, although I am not sure whether he had done so on every occasion when Mr Cassimatis was acting for him. I am, however, satisfied that he did so attend on 1 November 2000 in relation to the mortgage for $200,000 in favour of Albert Ling. I am satisfied that up to and including 3 November 2000 when that mortgage was taken out, there was no conduct on the part of Mr Grogan or Mr Cassimatis which had caused damage to Mr Diakakis. 47 It is surprising that an experienced solicitor such as Mr Cassimatis witnessed documents produced to him which were already signed, rather than insisting that they be signed in front of him or signed again in front of him. Such conduct is at least partially explicable if the signatory to those documents attended and personally confirmed that he had signed them. If that be the case (as I have found), it further explains the subsequent conduct of Mr Cassimatis in purporting to witness documents which he believed had been signed by Mr Diakakis where Mr Diakakis did not attend to confirm that the signatures were his. One can speculate as to whether such a situation had been deliberately brought about by Jenny Diakakis in having the loan documents for these earlier transactions already signed on the occasions that Mr Diakakis attended upon Mr Cassimatis. 48 A further transaction affecting the property occurred on 5 January 2001. This comprised a variation of the mortgage in favour of Mr Ling by increasing the amount of the loan to $235,000. Mr Cassimatis apparently acted on behalf of Mr Diakakis and Mr Grogan acted on behalf of Mr Ling. The additional loan monies were applied as follows: Grogan & Webb (costs etc) $3,193.60 T Diakakis $31,806.40.

49 The evidence of Mr Diakakis in respect of this transaction is that he knew nothing about it. He did not authorise Mr Cassimatis to act on his behalf and he did not attend at his office. He did not sign any documents associated with the transaction. This evidence is confirmed by that of Ms Novotny. Her conclusion, in relation to the signatures purporting to be those of Mr Diakakis on the variation of mortgage, deed of affirmation and deed of variation is that it is highly unlikely that those signatures were made by Mr Diakakis.

50 I accept the evidence of Mr Diakakis in relation to this transaction. I accept that he knew nothing about it. I accept that his signature was forged on the documents which enabled that transaction to take place. I accept him when he says that he did not attend Mr Cassimatis to have the transaction documents explained to him and witnessed. It follows that I do not accept the evidence of Mr Cassimatis in relation to this transaction.

51 The most likely scenario is that Jenny Diakakis attended the office of Mr Cassimatis and produced to him documents already signed. Mr Cassimatis either inferred or was told by Jenny Diakakis that Mr Diakakis had signed the documents and he then signed those documents falsely asserting that Mr Diakakis had signed them in his presence. It would seem that Mr Cassimatis acted in this way because of his previous dealings with Jenny Diakakis and Mr Diakakis. 52 On 15 February 2001 a further transaction took place in relation to the property. This comprised a second registered mortgage for $35,000 with the mortgagee being Hwa-Chu Chen. Mr Cassimatis purported to act on behalf of Mr Diakakis and Mr Grogan acted on behalf of Mr Chen. Nikita appeared on the documents as a co-borrower and guarantor. The loan monies were applied as follows: Grogan & Webb (costs etc) $3,085.10 T Diakakis - $31,914.90. 53 It was the evidence of Mr Diakakis that he knew nothing about this transaction. He did not sign any of the documents associated with the transaction. He did not attend Mr Cassimatis in relation to the transaction. He did not authorise anyone to enter the transaction on his behalf.

54 His evidence is supported by the assessment of Ms Novotny. Of the eight documents presented to her for analysis which related to this transaction, she concluded that it was highly unlikely that Mr Diakakis signed any of them. I am satisfied that Mr Diakakis knew nothing of this transaction and that the signatures on the documents purporting to be his are forgeries. In relation to this transaction and the variation of the Ling mortgage, I am satisfied that had he been made aware of them Mr Diakakis would have refused to consent to them.

55 It follows that I do not accept the evidence of Mr Cassimatis that in relation to this transaction, Mr Diakakis attended his office with documents already signed and that Mr Diakakis confirmed that the signatures were his. I do not accept Mr Cassimatis when he says that he explained this transaction to Mr Diakakis. I am, however, satisfied that Jenny Diakakis did attend upon Mr Cassimatis with documents purportedly signed by Mr Diakakis. It was those documents which Mr Cassimatis signed as a witness, falsely asserting that Mr Diakakis had signed them in his presence. 56 If I were to accept the evidence of Mr Cassimatis in relation to this transaction and the variation of the Ling mortgage, it would mean that Mr Diakakis had identified as his own, signatures which were forged. I cannot think of any reasonable explanation or motivation for such conduct on the part of Mr Diakakis. The inherent improbability of such conduct is another reason why I do not accept the evidence of Mr Cassimatis in relation to this transaction and in relation to the variation of the Ling mortgage. Mortgages to Permanent Custodians Limited and Ginelle Finance Pty Limited 57 The monthly payments required by the Ling and Chen mortgages continued to be made until June 2001. There is no evidence as to who made those payments but I infer that they were being made by Jenny or Terry Diakakis or by both. From June 2001 onwards, payments ceased and the default interest provisions of the mortgages came into effect. Mr Diakakis was unaware that there had been a default under the Ling mortgage.

58 On or about 14 August 2001 Jenny Diakakis telephoned Mr Grogan and inquired whether further loan monies could be advanced with the property as security. By letter dated 14 August 2001 Mr Grogan responded that second mortgage funds were available. It is clear from that letter that at that time Mr Grogan was unaware that the Ling and Chen mortgages were in default. Later that month, Mr Grogan learned of the default and thereafter made inquiries through AAA Finance as to whether the existing mortgages could be paid out and the loan refinanced. Mr Grogan was told or assumed that mortgage payments would be made by Jenny and Terry Diakakis.

59 In the agreed bundle of documents there is a letter of offer, dated 19 September 2001, addressed to Michael and Nikita Diakakis at 259 Botany Street, Kingsford (document 1.609). The amount of the loan advance in that letter of offer was $371,000. I do not know if that letter was sent. If it was, I accept that Mr Diakakis did not see it. One can infer that since it was also addressed to Nikita that he may have intercepted it.

60 Apart from that letter, all communications in relation to the refinancing transaction took place between Jenny Diakakis and either Mr Grogan or AAA Finance Services. At all times Mr Grogan believed that he was acting on behalf of Mr Diakakis.

61 On 25 September 2001 Mr Grogan received a facsimile from AAA Finance Services enclosing letters of offer from Bleier Mortgage Corporation Pty Limited in relation to two proposed loans. The first was for $371,000 and the second for $26,500. The first loan was to be secured by a first mortgage over the property and the second loan by a second mortgage. On 26 September 2001 Mr Grogan forwarded those loan proposals to Mr Diakakis but care of Jenny Diakakis at her Quakers Hill address. All subsequent correspondence from Mr Grogan to Mr Diakakis was addressed to him care of Jenny Diakakis at that address.

62 On 2 October 2001 Mr Grogan received the loan proposals back, apparently signed by Mr Diakakis. By letter dated 8 October 2001 Mr Grogan received loan and mortgage documents from RL Kremnizer & Co which needed to be signed for the two loan transactions to proceed.

63 After receipt of those documents, the following telephone conversation took place between Mr Grogan and Jenny Diakakis: GROGAN: "I now have the loan and mortgage documents from RL Kremnizer. I will need to see Michael as he is the person providing the mortgage to explain the loan and mortgage documents to him. When can he come in to see me?" JENNY: "As Michael lives in Kingsford would it be possible for him to see Peter Cassimatis who acted for him previously, to explain the loan and mortgage documents? This would be a lot quicker and simpler from his point of view." GROGAN: "There is no reason why that can't occur. However you will need to come and pick up the mortgage documents and take them to Peter Cassimatis. When Peter Cassimatis sees Michael he will need to explain the documents and their effect to him and then have Michael sign the declaration and acknowledgment by mortgagor and return these to me with the other documents." JENNY: "OK I will pick the documents up and have that done." 64 On or about 12 October 2001, Mr Grogan received those documents back from Jenny Diakakis. Included with those documents was a "declaration by mortgagor" which appeared to be signed by Mr Diakakis and witnessed by Mr Cassimatis. Mr Grogan said that he relied upon this document as evidence that Mr Cassimatis had seen Mr Diakakis and explained the legal effect of the transactions to him. He said that he would not have proceeded to settlement of the refinancing transaction unless he had seen what he believed to be an original executed "declaration by mortgagor". I accept this evidence.

65 The refinancing transaction settled on 19 October 2001. It comprised a first mortgage in favour of Permanent Custodians Limited in the sum of $371,000 and a second mortgage in favour of Ginelle Finance Pty Limited in the sum of $26,500. In due course both mortgages were registered. Nikita Diakakis appeared on the documents as a co-borrower. The loan monies were applied as follows: "RL Kremnizer & Co (costs, stamp duty, brokerage) - $16,815 Mr Ling (repayment) - $259,214.11. Mr Chen (repayment) - $43,040.04 Grogan & Webb (costs and disbursements) - $4,116.65 J Diakakis - $74,341.20" 66 At no time during the refinancing transaction did Mr Grogan ever have personal contact with Mr Diakakis, either by phone or in conference. 67 A file note made by Mr Grogan's secretary and dated 16 October 2001 setting out a telephone conversation with Jenny Diakakis indicated that so far as Jenny was concerned there was considerable urgency associated with the refinancing transaction. The file note relevantly recorded: "20 minute call from Jenny Diakakis seeking urgent update. Needs funds very urgently. Being pressured from "another source". This is not her problem - she is "helping out a friend" - she expected to settle yesterday. Jason of AAA said it would settle today. Kremnizer has the money and is ready. Said - Kremnizer is returning some documents today which need more signatures and further completion. She said why couldn't he fax them? Explained that he would require the original. She will collect as soon as they arrive - said I would expect them in our offices by DX this morning. She wants us to fax as soon as she returns them, with the promise that they will be sent by DX tonight. Re: Accountant's certificate. This was faxed by Jason yesterday. They have got that. Said they will need the original. She asked what else is outstanding. Said I was faxing Kremnizer at the moment with an update and some of the balance of requirements (it was 11 am). She said she understood that Mr Grogan had said to Jason that everything would be sent by 10am this morning and that there would be no further outstanding requirements. Said I was working on it and was about to send it, but that there were still a couple of things to come - e.g. 149 certificate, which would be faxed to me on Thursday. I would see if they would settle on an undertaking - provided we could get a settlement date out of them. They said they need three days. She said that is not her understanding. They can give her a cheque as soon as they have the documents. She wants to pick up the cheque immediately. Explained that we would have to formally settle - we would not hand over the title documents without seeing the colour of their money. She understood that, but it must happen quickly - she will probably go to settlement to pick up cheque. We to ring her when documents arrive. She asked me for an indication of payout figure. Said I had not checked Mr Grogan's figures, but it appeared to be in the $70,000's... She horrified - was expecting over $90,000. Reminded her of 'the problems with payments to Mr Ling which now had to be paid at interest penalty rates." 68 Urgency on the part of Jenny Diakakis was reflected in a letter from Grogan & Webb to RL Kremnizer dated 17 October 2001 as follows: "We refer to the above matter and advise that the mortgagor has now completed the documents, and a copy is faxed herewith. The originals will be hand delivered to you by Mrs Diakakis within the next hour. We enclose Letter of Conduct. The original will be handed to you on settlement. Our clients wish to settle this matter tomorrow. Would you please confirm that this will be in order. Settlement will take place at the offices of our Law Stationer, Legalink, Level 8, 170 Phillip Street, Sydney. Would 2.30pm be convenient to you?

Upon your confirmation of settlement date, we will forward Direction to Pay. Should you have any queries please do not hesitate to contact the writer or his secretary, Connie."

69 It was the evidence of Mr Diakakis that he knew nothing about the refinancing transaction which comprised the two mortgages, dated 19 October 2001. He denied that he signed any of the documents associated with that transaction. He denied that he had attended upon Mr Cassimatis to have the transaction explained to him and in particular, he denied that he had signed the document "Declaration by Mortgagor" dated 12 October 2001. 70 His evidence is supported by the analysis of Ms Novotny. She was provided with ten documents associated with that transaction and concluded that it was highly unlikely that Mr Diakakis had signed any of them. I accept that Mr Diakakis did not sign any of the documents associated with the refinancing transaction of 19 October 2001 and that the signatures appearing on those documents which purport to be his, are forgeries.

71 On 2 November 2001 Mr Diakakis received two letters in the mail. He asked his son Phillip to explain the letters to him. Having read the letters, Phillip said: "This letter is from La Trobe Home Loans of Australia and they say that you have a loan with them for $371,000." 72 After receiving that information, Mr Diakakis spoke to Nikita and said:

"What are these papers? Where did this money go, this $371,000? NIKITA: "It's a mistake in the computer." MR DIAKAKIS: "I don't believe you. I want you to ring Jenny now and find out what this is all about."

Nikita then left the room. Shortly thereafter he returned and said: NIKITA: "I have spoken to Jenny and she says it's a mistake in the computer."

Mr Diakakis then telephoned Jenny and said: "Give the money back to the company."

Jenny did not respond and hung up. Mr Diakakis continued to make inquiries of Nikita, but did not receive a satisfactory response from him.

73 On 6 November 2001 Mr Diakakis, accompanied by Phillip, visited a local pharmacist who was also a Justice of the Peace. This person made some inquiries and obtained documents from the Land Titles Office. Those documents purported to have the signature of Mr Diakakis on them and confirmed the existence of a registered first mortgage over the property securing a loan of $371,000. Mr Diakakis and Phillip then attended the Maroubra Police Station on 9 November 2001 and made a complaint about the forged signatures. Both made statements.

74 I accept that Mr Diakakis knew nothing about the refinancing transaction. His reactions upon receipt of the letters of 2 November 2001 culminating in his complaint to the police are fully consistent with a person who has been made aware of an unauthorised transaction affecting his property and that documents had been brought into existence which contained his forged signature. I am satisfied that had Mr Diakakis been made aware of this transaction he would have refused his consent to it.

75 It follows from that conclusion that I do not accept the evidence of Mr Cassimatis in relation to the refinancing transaction. I accept that he had discussions with Jenny Diakakis as set out in his affidavit of 31 January 2003 '(para 17 et seq) but I do not accept that he saw Mr Diakakis on 12 October 2001 and I do not accept that he explained the refinancing transaction to Mr Diakakis. I do not accept that he witnessed the signature of Mr Diakakis on the document entitled "declaration by mortgagor" dated 12 October 2001. I do not accept that he witnessed the signature of Mr Diakakis on any of the documents associated with the refinancing transaction and the two mortgages dated 19 October 2001.

76 I infer that the true sequence of events was that Jenny Diakakis brought a bundle of documents to Mr Cassimatis which appeared to have the signature of Mr Diakakis on them and that he signed those documents as a witness falsely asserting that Mr Diakakis had signed them in his presence. The documents which he purported to sign as a witness included the document headed "declaration by mortgagor".

77 By way of general comment, it may seem somewhat inconsistent that I have accepted the evidence of Mr Cassimatis in preference to that of Mr Diakakis in relation to those transactions up to and including the Ling mortgage of 3 November 2000, but have comprehensively rejected his evidence in respect of the subsequent transactions. In addition to the specific matters to which I have referred, there are two major considerations which have led me to that conclusion.

78 The first is the inconsistent and rather fanciful evidence of Mr Diakakis and Phillip concerning the Ling mortgage and their unexplained inaction when they apparently discovered an unauthorised loan for $200,000 with the property as security. Being satisfied as I am that Mr Diakakis was aware of that transaction, I see no reason to disbelieve Mr Cassimatis when he says that he explained it to him and that he signed the documents as witness even though they had already been signed and that he did so because Mr Diakakis was present and confirmed that the signatures were his. In relation to the transactions up to and including the Ling mortgage of 3 November 2000, I do not accept that Mr Diakakis was so naive as to sign such a large number of documents on the basis of what appear to be rather unsatisfactory explanations and requests by Jenny Diakakis. I am satisfied that he would have been well aware and have understood the amounts set out in figures on some of those documents. My assessment of Mr Diakakis is that he is considerably more astute than his evidence in relation to those earlier transactions suggests.

79 The second major consideration relates to the impression created on me by Mr Cassimatis himself. He gave evidence in an impressive manner despite his illness. I do not accept that a solicitor of his experience on the basis of one transaction in February 2000, would witness documents purportedly signed by Mr Diakakis and would claim to have advised him in six further significant transactions without having seen him again. The more likely scenario is that Mr Diakakis did attend upon Mr Cassimatis after the transaction of 15 February 2000 on a number of occasions and in particular in relation to the Ling mortgage of 3 November 2000 and on those occasions had confirmed to Mr Cassimatis that the signatures on the security documentation were his. It was on the basis of that previous experience that Mr Cassimatis was prepared to sign loan documents in relation to the later transactions in the absence of Mr Diakakis and without Mr Diakakis confirming that the signatures on the documents were his. It would seem that Mr Cassimatis assumed that since the earlier transactions had been approved by Mr Diakakis, the later transactions were also genuine.

80 No payments of interest were made pursuant to the two mortgages of 19 October 2001. The default interest provisions under those/ mortgages immediately came into effect. By 5 November 2002 when Studdert J entered judgment in favour of Ginelle Finance Pty Limited, nothing had been done to regularise the situation or discharge the mortgages. No explanation was given by Mr Diakakis for this inaction.

81 The mortgage in favour of Ginelle Finance Pty Limited was discharged on 19 November 2002 for $34,116.35 plus $462 payable to RL Kremnizer & Co on the discharge of mortgage.

82 The mortgage in favour of Permanent Custodians Limited was discharged on 7 October 2003. The pay out figure was $482,487.58. RL Kremnizer & Co was paid $539 for acting on the discharge of mortgage.

83 The property was sold on 7 October 2003 and realised $808,000. The agent's commission on the sale was $16,114. The solicitors' costs on the sale were $3,337.90.

84 The costs which Mr Diakakis was ordered to pay to the plaintiff in relation to the contested proceedings before Studdert J were $29,149.30. His own costs in defending those proceedings were $22,715. On 7 October 2003 Mr Diakakis with his son Phillip purchased a unit at 2/259-261 Maroubra Road, Maroubra. The purchase price of the unit was $513,000. Mr Diakakis contributed $184,598.73 to that purchase. He paid stamp duty on the contract of $18,579, stamp duty on the mortgage of $1261 and legal costs of $3429.10. The unit is mortgaged for an amount of $330,000. Phillip Diakakis is making the mortgage payments.

85 There are two other factual issues which need to be dealt with. Included in the agreed bundle of documents (document 1 - 133) is a letter which on its face appears to be a certificate from D and A Biggs Accounting Services, dated 15 October 2001, signed by Dennis Biggs and addressed to the Investor Relations Manager, La Trobe Capital and Mortgage Corporation. The document asserts that Mr Biggs is the accountant of Michael Diakakis and has advised him as to his obligations under the agreement. It also asserts that the borrower is able to meet interest payments and can do so without substantial hardship. Such a certificate was required to satisfy one of the conditions in the letter of offer for the refinancing transaction.

86 I accept the evidence of Mr Diakakis that he had never heard of Mr Biggs and that Mr Biggs was not and never had been his accountant. How that letter came into existence was never explained. There was a strong inference available that the signature on the document was a forgery and that it was part of the overall scheme to raise further monies at the expense of Mr Diakakis with the property as security.

87 The other factual issue related to the credit of Mr Diakakis and Phillip. Mr Diakakis asserted that after he and Phillip discovered the circumstances surrounding the refinancing transaction of 19 October 2001 he cut off relations with Nikita, Jenny and Terry. He asserted that he had not had contact with them thereafter. 88 Evidence was given by Michael Peters, a legal practitioner and lecturer at the School of Business Law and Taxation at the University of NSW, who had lived next door to the property since he was a child. His evidence was that in about March 2003 he overheard the following conversation between Terry Diakakis and Mr Diakakis: MR DIAKAKIS: "What have you done with my money?" TERRY: "I've spent it." MR DIAKAKIS: "They are going to take my house. I want my money back." TERRY: "I don't have it." MR DIAKAKIS: "I want it back. I want it now. I'm going to lose my house." TERRY: "I don't have it." MR DIAKAKIS: "What have you done with it?" TERRY: "I've spent it." MR DIAKAKIS: "I got the money for you. I now want it back." 89 Mr Peters particularly remembered the conversation because it had taken place on the day of the State elections in 2003.

90 Mr Diakakis denied that such a conversation had taken place with Terry on that date, or at all. Phillip Diakakis gave evidence that on the day of the State elections in 2003 it was he not Terry who had a discussion with his father. Phillip said that he did not remember exactly what was said, but he did remember his father speaking in a loud voice and that his father had said, "What have they done with my money?" He did not say "What have you done with my money?"

91 Nothing really turns on that factual issue and I have already decided credit issues based on other considerations. Nevertheless, since some considerable time was spent on this issue at trial, I should resolve it. 92 I found Mr Peters to be an impressive witness. He had a good knowledge of the Greek language. Apart from knowing Irina and Peter Cassimatis he had no motive for not telling the truth. It was his evidence that the conversation was in Greek on the part of Mr Diakakis and in English on the part of Terry and was conducted in a loud voice. Under cross-examination he explained that Phillip's explanation of a confusion between "you" and "they" might be valid in English but that such confusion does not occur in the Greek language. I have a reasonable knowledge of Greek and that comment by Mr Peters is correct.

93 I accept that in some aspects of his evidence, i.e. in relation to the ownership of one of the motor vehicles parked on the property, Mr Peters may have been mistaken but I accept him when he says that the conversation which he heard took place between Mr Diakakis and Terry, not between Mr Diakakis and Phillip. I accept that the conversation did take place in March 2003. It follows that Mr Diakakis was not being candid with the Court when he said that he had had no contact with Terry Diakakis since he became aware of the fraudulent transactions of 19 October 2001. Liability of Mr Grogan

94 As previously indicated, I found Mr Grogan to be entirely honest. Where his evidence is in conflict with that of Mr Diakakis, I accept the evidence of Mr Grogan and reject the evidence of Mr Diakakis. 95 The case against Mr Grogan relied at least in part upon Graham v Hall & Anor [2006] NSWCA 208. That case does not impact directly upon the matters which I have to decide. Although there is some factual similarity between the situation of the solicitor in that case and Mr Grogan, the solicitor did not appeal and accordingly the Court of Appeal did not have occasion to examine his conduct. Moreover, what. appears to have been decisive in the decision of Williams DCJ at first instance in relation to the solicitor was the following: "21 Williams DCJ pointed out that in cross-examination Mr Gelin had conceded that, when acting for Mrs Hall in regard to the mortgage transaction, he heard "alarm bells". This was because he knew that Mr Hall had a propensity for bad management of his business and had had difficulty in the past in paying his debt. Moreover Mr Gelin had been told that Mrs Hall was dying of cancer but, nevertheless was about to enter into a refinancing of the mortgage as a consequence of Mr Hall's business debts. Another cause for concern was that, after payment of the existing mortgage and some business debts of $9,000 the rest of the money advanced was to paid to Mr Hall alone." (Graham v Hall [21].) 96 The legal basis for the claim against Mr Grogan is that he had accepted a general retainer from Jenny Diakakis to act on behalf of Mr Diakakis as mortgagor in the refinancing transaction. Because of that relationship Mr Grogan owed a duty to take reasonable care to protect the interests of Mr Diakakis. Included in that 'duty was an obligation to satisfy himself that Mr Diakakis understood and consented to the refinancing transaction. 97 Factually the case against Mr Grogan is that there were sufficient indicia to sound "alarm bells" even though Mr Grogan was not in fact sr6 alerted. In those circumstances it was submitted that he should have confirmed that he did have instructions from Dr Diakakis. The claim against Mr Grogan is pleaded in tort only.

98 The indicia which should have alerted Mr Grogan that there could be a problem with the refinancing transaction were identified as follows: (i) That Mr Grogan at no time in the transaction had any personal contact with Mr Diakakis.

(ii) The unusual circumstance of Jenny Diakakis requesting that another solicitor advise Mr Diakakis as to the nature of the transaction when there was no pressing need for that to happen except that it was "more convenient".

(iii) That the previous loans to Ling and Chen of $270,000 were in default and had been for in excess of four months.

(iv) That the new loan was for a significantly greater amount ($397,500) in circumstances where payments in respect of the existing mortgages had not been maintained.

(v) That Mr Diakakis was a pensioner and had to rely upon others to make payments in respect of the refinancing transaction in circumstances where those persons had demonstrated in relation to the existing mortgages that they could not maintain payments.

(vi) That Mr Diakakis himself was getting no direct benefit from the refinancing transaction.

(vii) That the person who appeared to be directly benefiting from the transaction, Jenny Diakakis, was the intermediary who was providing all instructions to Mr Grogan in relation to the matter. (viii) The urgency with which Jenny Diakakis was pressing for the refinancing transaction-to be finalised and her anxiety to receive additional' monies from the transaction (ix) The unattractiveness of the refinancing transaction in that the costs were onerous and the interest rates, particularly default rates, were high. On behalf of Mr Grogan it was submitted that he should not have been so alerted for the following reasons:

99 On behalf of Mr Grogan it was submitted that he should not have been so alerted for the following reasons. (i) So far as he was aware Mr Diakakis had since February 2000 engaged in seven refinancing exercises in relation to the property. He was entitled to think that this was simply one more in that sequence. (ii) Mr Grogan was entitled to rely upon the certificate entitled "Declaration by Mortgagor" signed by Mr Cassimatis as indicating that: (a) Mr Cassimatis had met with Mr Diakakis on 12 October 2001. (b) Mr Diakakis had signed the documents in the presence of Mr Cassimatis. (c) Mr Cassimatis had provided the relevant disclosure and advice. (d) Mr Diakakis understood the transaction. (e) Mr Diakakis knew about the transaction.

(iii) There was a real advantage for Mr Diakakis in the refinancing transaction going ahead in that he would cease being obliged to pay interest at default rates under the Ling and Chen mortgages and would be paying interest at a lower rate under the new mortgages. 100 It was also submitted on behalf of Mr Grogan that the conduct of Mr Cassimatis in falsely certifying that he had met with Mr Diakakis and fully explained the transaction to him had broken the chain of causation and that the real cause of the loss which Mr Diakakis had suffered in respect of the refinancing transaction had been caused by the conduct of Mr Cassimatis.

101 In resolving the question of the liability of Mr Grogan, it is essential not to engage in hindsight reasoning. One has to, as best one can, place oneself in the position of Mr Grogan as it was in October 2001 with the knowledge that he then had available. One then has to assess his actions as best one can from that standpoint. (Vairy v Wyong Shire Council (2005) 80 ALJR 1 at [61] Gummow J, [126] Hayne J.) 102 The method of reasoning approved in Wyong Shire Council v Shirt (1979­80) 146 CLR 40 at 47 provides some assistance. Quite clearly it was reasonably foreseeable had Mr Grogan turned his mind to the question, that Mr Diakakis may have been unaware of the refinancing transaction. That risk could not be regarded as far fetched or fanciful. 103 What then has to be assessed, on the basis of the information available to Mr Grogan at the time, is what a reasonable solicitor would have done in response to the foreseeable risk. This involves a consideration of the magnitude of the risk and the degree of the probability of its occurrence along with the expense, difficulty and inconvenience of taking alleviating action. In this case it was generally accepted that there was little inconvenience or cost involved in taking appropriate alleviating action, i.e. in contacting Mr Diakakis directly. 104 Although the matter is finely balanced and certainly not without difficulty, I have concluded that in fulfilling his duty to Mr Diakakis, Mr Grogan should have made personal contact with him to satisfy himself that Mr Diakakis was aware of and consented to the refinancing transaction. It was not sufficient for him to rely upon the documents signed by Mr Cassimatis. In a straight forward mortgage transaction it might be sufficient for Mr Grogan to rely upon documents signed by another solicitor, but in this case there were special circumstances which required him to do more. There were unusual circumstances associated with this transaction. Taken on their own they may not have required Mr Grogan to personally satisfy himself that Mr Diakakis was aware and consented to the refinancing transaction. Taken in combination, however, they should have sounded "alarm bells" with Mr Grogan. 105 As the solicitor for Messrs Ling and Chen, Mr Grogan knew that there had been a default in excess of four months in interest payments in respect of a total loan of $250,000. He knew that the new loans .mounted to $397,500. He knew that Mr Diakakis as a pensioner could not himself meet the interest payments required under the new loans. Mr Diakakis would have to rely upon others, in particular Jenny and Terry Diakakis, to make those payments. Yet they were the very persons who had apparently let Mr Diakakis down in respect of the Ling and Chen transactions when interest payments were significantly less. There was nothing told to him to suggest that the financial position of Jenny and Terry Diakakis was any better in October 2001 than it had been in June 2001 when default on the earlier loans had taken place. Mr Grogan, had he turned his mind to it, must have realised that in entering the refinancing transaction, there was a strong likelihood of a default under the new mortgages in which case Mr Diakakis would almost certainly have to sell the property.

106 Mr Grogan was also aware from the four transactions with which he was involved, that the beneficiaries of the monies raised against the property were Jenny and Terry Diakakis, not Mr Diakakis. The urgency with which Jenny Diakakis sought to have the refinancing transactions finalised so that additional monies could be made available to her was an indicator not only that she and Terry were unlikely to be able to meet the interest payments, but that she had a significant personal interest in the refinancing transaction being finalised. This should have been a matter of concern when she was the sole conduit for all instructions. 107 Against that background the fact that he had not had any personal or direct contact with Mr Diakakis, but had only dealt with him through Jenny Diakakis, should have caused the "alarm bells" to ring had Mr Grogan turned his mind to those matters. Breach of duty has been established against Mr Grogan. 108 There was evidence before me on this question from Mr Tzannes, a.very experienced solicitor in conveyancing matters. His evidence was put forward as that of an expert in relation to the conduct of Mr Grogan. I have not referred to that evidence in my analysis of the breach of duty question insofar as Mr Grogan is concerned. I have formed the opinion that this was not a question which required expert opinion and I have relied upon my own normative assessment of what Mr Grogan's response should have been to the circumstances as he understood them. 109 In relation to the causation question, the proposition put forward on behalf of Mr Grogan is simply another version of the "but for" test. The proposition is undoubtedly correct. "But for" the conduct of Mr Cassimatis, the refinancing transaction of 19 October 2001 would not have proceeded. The "but for" test, however, is not the definitive test of causation (March v E and MH Stremare Pty Limited & Anor (1990 - 1991) 171 CLR 506. 110 The High Court made it clear in that case that causation is essentially a question of fact to be answered by reference to common sense and experience. Specifically the Court made it clear that one could have multiple causes for a loss and that in such a situation more than one party could be held legally responsible. That is the situation here. Both the conduct of Mr Grogan and the conduct of Mr Cassimatis made a material contribution to the loss which Mr Diakakis suffered as a result of the refinancing transaction of 19 October 2001 being completed.

111 Liability in negligence has been established by Mr Diakakis against Mr Grogan in relation to the refinancing transactions of 19 October 2001. Liability of Mr Cassimatis

112 In view of the factual findings which I have made, the liability of Mr Cassimatis in negligence to Mr Diakakis is clear. He falsely asserted that Mr Diakakis had signed documents in his presence. He falsely asserted that he had explained the variation of the Ling mortgage, the Chen second mortgage and refinancing transactions to Mr Diakakis.

113 The analysis of the position at law is succinctly stated in Graham v Hall [2006] NSWCA 208 as follows: "47 Here the interest of Mrs Hall for which she seeks protection is her interest as joint owner of the family home. The act of which she complains amounts to an interference with or an infringement of that interest. Her interest must have been obvious to Mr Graham when he attested Mrs Hall's purported signature, as mortgagor, on the mortgage documents. 48 The risk of harm to Mrs Hall's interest in the property, resulting from the signature in question not being hers, arose from the likelihood that the falsely attested mortgage was likely to be registered. This risk was not only foreseeable but self evident." 114 The following statements of principle relating to the importance of witnessing documents were approved in Graham v Hall.

"58 Similar considerations apply to a person who witnesses a signature to commercial documents such as a mortgage. As Rolfe J explained in Westpac Banking Corporation v Samson (1994) 6 BPR 13,790 at 13,796: "The purpose of the requirement that a registerable document should be signed by a person in the presence of another to whom he/she is personally known is, inter alia to avoid the registration of forged documents." 59 In Rodrick: "Forgeries False Attestations and Imposters: Torrens System, Mortgages and the Fraud Exception to Indefeasibility" 2002 Deakin Lrev 5 the learned author says at 13: "A false attestation constitutes a violation of the Registrar's right to take the mortgage document at its word when it states that the mortgagor signed in the presence of an attesting witness, and to proceed on the assumption that the mortgage document was properly executed and can be safely registered. A false attestation is therefore an attack on the integrity and reliability of the registration system; the false witness has not acted to quell potential scams by properly employing the protections that have ,been built into the system." " 115 The actions of Mr Cassimatis caused loss to Mr Diakakis in that the Ling variation of mortgage, the Chen mortgage and the refinancing transaction could not have proceeded to completion and in the case of two of them, to registration except for the conduct of Mr Cassimatis. His conduct made a significant and material contribution to the completion of those transactions and the advancement of monies under them to Jenny and Terry Diakakis.

116 I find that Mr Cassimatis is liable in negligence for the losses suffered by Mr Diakakis as a result of the Ling variation of mortgage, the Chen second mortgage and the refinancing transactions of 19 October 2001.

117 Nikita, Terry and Jenny Diakakis did not attend the hearing of this matter, nor were they represented. No defence has been filed on their behalf. No attempt, however, was made to enter default or summary judgment against them. I was asked to deal with the claims against them on the basis of the evidence before me. 118 On the basis of that evidence, liability in deceit is clearly established against Jenny Diakakis. I find that she is liable for the loss suffered by Mr Diakakis in respect of the Ling variation of mortgage, the Chen mortgage and the refinancing transactions of 19 October 2001.

119 A cause of action has not been established against Nikita Diakakis. There is evidence to suggest that he may have been aware that Jenny Diakakis was doing things to the detriment of Mr Diakakis without his knowledge, but that does not give rise to a cause of action against him. There is no evidence that he received any benefit under any of the transactions which occurred without the knowledge and consent of Mr Diakakis. In those circumstances, a verdict should be entered in his favour.

120 In relation to Terry Diakakis, he clearly received a direct benefit from the Ling variation of mortgage and the Chen mortgage. The conversation between him and Mr Diakakis, overheard by Mr Peters, certainly confirms that he received monies from the fraudulent transactions. It was submitted, on behalf of Mr Diakakis, that in those circumstances he should be regarded as the principal and Jenny Diakakis as his agent.

121 Apart from the fact that he received monies from the impugned transactions, there is no evidence before me of any actions on the part of Terry Diakakis which contributed to the fraudulent transactions taking place. In the absence of such evidence, it is not sufficient to establish liability on his part that he received monies from the fraudulent transactions. Accordingly, a verdict should be entered in his favour. Contribution between Mr Cassimatis and Mr Grogan 122 Mr Grogan and Mr Cassimatis cross-claimed each against the other. The only area of damage in relation to which contribution between them is relevant are the losses suffered by Mr Diakakis as a result of the refinancing transactions of 19 October 2001. Mr Grogan has no responsibility for anything which happened before that date. Accordingly the apportionment exercise which I propose to carry out only relates to that area of damage. 123 Applying the test in Podrebersek v Australian Iron & Steel Pty Limited (1985) 59 ALJR 492 at 494, what needs to be considered in apportioning liability of this kind is a comparison of culpability, i.e. the degree of departure from the standard of care of the reasonable man and the relative importance of the acts of the parties in causing the damage.

124 In this case it seems to me that the contribution by both Mr Grogan and Mr Cassimatis to the loss suffered by Mr Diakakis was the same. Where their actions significantly differ is in relation to a comparison; of relative culpability. In that sense Mr Grogan was as much a `victim of the fraudulent behaviour of Jenny Diakakis as was Mr Diakakis. The conduct of Mr Cassimatis, however, in falsely asserting that events had occurred when they had not, involved a much higher level of culpability than that of Mr Grogan. Taking those matters into account, I would attribute liability between them as 25% against Mr Grogan and 75% against Mr Cassimatis. Contribution between Jenny Diakakis and Mr Grogan

125 Mr Grogan cross-claimed against Jenny Diakakis for contribution. Applying the Podrebersek principle it seems to me that similar considerations arise as in the apportionment between Mr Cassimatis and Mr Grogan. Once again the area of damage concerned is that which is attributable to the refinancing transactions of 19 October 2001.

126 In this case the contribution to the loss by Jenny Diakakis was greater than that of Mr Grogan and her culpability was significantly greater. I would apportion liability between them at 10% against Mr Grogan and 90% against Jenny Diakakis. Contribution between Mr Cassimatis and Jenny Diakakis

127 Mr Cassimatis cross-claimed against Jenny Diakakis. The contribution sought by Mr Cassimatis related to the loss suffered by Mr Diakakis from the variation of the Ling mortgage, the Chen mortgage and from the refinancing transactions of 19 October 2001.

128 Applying the Podrebersek principle, it is clear that both Jenny Diakakis and Mr Cassimatis contributed directly to the loss of Mr Diakakis and it seems to me that their culpability in relation to those losses is roughly the same. Accordingly, I would apportion liability between them at 50% each. Claim by Mr Cassimatis against Lawcover

129 Mr Cassimatis as a solicitor is insured by American Reinsurance Company (AMRE) pursuant to the Lawcover Certificate of Insurance 2001/2002. In the sixth cross-claim he claimed indemnity under that Certificate of Insurance in respect of any award of damages made against him in favour of Mr Diakakis in these proceedings.

130 The Certificate of Insurance relevantly provides:

"2. We agree to indemnify you against civil liability for a claim that: (a) arises from the private legal practice of the firm ..." 131 Clause 26 contains the following relevant definitions: (a) "claim" means: (i) a demand for, or an assertion of a right to, compensation or damages; … (I) "private legal practice" means the provision of such services as are provided in the normal course of carrying on the business of a solicitor in private practice." 132 If they were the only relevant provisions there would be no issue that Mr Cassimatis is entitled to be indemnified under the Certificate of Insurance in that the damages to which Mr Diakakis is entitled arose from the private legal practice of his firm. AMRE however relies upon the following exclusion: "19(a)(vii) We will not indemnify you under this Certificate of Insurance when: (a) the claim arises from: (vii) any dishonest ,or fraudulent acts or omission of a principal or corporate firm, whether directly or indirectly ..." 133 I have found that in relation to the variation of the Ling mortgage, the Chen mortgage and the two mortgages of 19 October 2001 Mr Cassimatis made a number of false assertions when allowing documents to be provided to Mr Grogan and the lenders' solicitors representing that he had witnessed Mr Diakakis signing the documents when he had not and when he allowed statutory declarations to be provided to those persons knowing the contents to be false, i.e. that he had provided legal advice to Mr Diakakis. 134 In relation to similar conduct on the part of a Justice of the Peace, 1pp JA made the following observations in Graham v Hall: "[88] In attesting the mortgage, Mr Graham made two representations. Firstly, he represented that the person who was Mrs Hall appended her signature to the mortgage did so in his presence. Secondly, he represented that Mrs Hall was personally known to him. [89] The first representation was untrue and was untrue to Mr Graham's knowledge. It was therefore dishonest. …

[107] Justices of the Peace who sign attestation clauses stating that the declarants have made and subscribed a declaration before them when that is not true commit an act that is the antithesis of their function. Such an act strikes at the heart of the system that they are charged to protect. It constitutes a dishonest misrepresentation and, in my view, is an act done "maliciously" within the meaning of that word in section 135(2) [Justices Act]." 135 Those comments made in respect of a Justice of the Peace apply with even more force to the actions of a solicitor who is an officer of the Supreme Court. 136 Against that background, it is clear that exclusion 19(a)(vii) in the Lawcover Certificate of Insurance has been made out and that AMRE is entitled to refuse' to indemnify Mr Cassimatis in respect of those matters in which Mr Diakakis has been successful against him. Quite clearly "the claim" of Mr Diakakis arises from "dishonest" acts or omissions of Mr Cassimatis. 137 That same exclusion was considered by Young CJ in Eq in Yaktini v Perpetual Trustees Victoria Limited [2004] NSWSC 1078. That case involved a solicitor falsely warranting that persons had signed some statutory declarations before him. Having reviewed the authorities, his Honour concluded that: "52 For purposes of a clause in insurance polices such as the one that I have set out earlier, a person may be dishonest even though he or she had no such intention." 138 On the facts before him his Honour said: "[58] Even though Mr Murphy may well have had no malicious intent, it is clear that his actions in and about sending the documents back to Heidtman & Co and a fortiori his involvement with the St George letter were conscious and misleading which were misleading representations and accordingly, were dishonest within the meaning of the exclusion. One must now turn to the wording of this particular policy which is different to that considered in the leading cases which I have just discussed. The exception is to apply where "the claim arises from any dishonest or fraudulent acts etc."

His Honour accepted that the phrase "arises from" had a very wide application and was to be construed more widely in favour of the insurer than the words in the former policy. His Honour concluded that the loss in the case before him had a sufficient causal connection with Mr Murphy's dishonesty to make the exclusion come into play. The same approach applies here.

139 In respect of the sixth cross-claim therefore, I enter judgment in favour of the sixth cross-defendant,, AMRE.

Damages 140 A schedule of damages was prepared on behalf of Mr Diakakis. That schedule assumed that all transactions after the date of the mortgage to Mr Impey were unauthorised by Mr Diakakis. I have found that all transactions, up to and including the mortgage to Mr Ling, were authorised by Mr Diakakis. Nevertheless the plaintiff's schedule of damages remains a useful reference point for the claim.

141 Although no specific submissions were made, I am of the opinion that s5D of the Civil Liability Act 2002 (NSW) applies to these claims. This section provides: "(1) A determination that negligence caused particular harm comprises the following elements: (a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and

(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability)."

Section 5D(4) is relevant to an understanding of s5D(1)(b). Section 5D(4) provides: "(4) For the purpose of determining the scope of liability, the Court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party." 142 The application of this section was considered in Graham v Hall at [77] - [82]. At [78] 1pp JA said: "78 Many of the provisions of the Civil Liability Act are modelled on the Recommendations of the Final Report by the Panel appointed by the Commonwealth and State Governments to review the law of negligence (Second Reading Speech, Hansard, 23 October 2002 at 5765). Section 5D(1) is based on Recommendation 29(B) and s5D(4) is based on Recommendation 29(H). The rationale for these Recommendations appears in paragraph 7A1 to 7.51 of the Final Report. It is sufficient to state that amongst the points made in these paragraphs is that a finding that the negligent conduct was a necessary condition of the harm does not, itself, justify a conclusion that the defendant ought be held liable for the consequences of the negligence. Hence the second element, set out in 5D(1)(b), needs to be addressed. The second element, namely, the scope of liability for consequences, involves normative issues that may be applicable in determining whether negligent conduct caused harm. It is in this context that the statement that causation is a matter of common sense is most often made." 143 In considering the heads of damage claimed by Mr Diakakis in his schedule, questions of causation have been important in determining firstly whether the damage claimed was causally connected to the fraudulent transactions and where that was established, which tortfeasor should be held responsible. While not referring specifically to s5D in each case, I have endeavoured to apply the process of reasoning there set out.

144 A claim was made for the difference between the sale price of the property ($808,000) and the purchase price of the unit at 259/261 Maroubra Road, Maroubra. No basis for such a claim was made out and I reject it. 145 A claim was made for the whole of the payout figures for the two mortgages of 19 October 2001 and the legal fees associated with their discharge, ie $482,487.58 in respect of the mortgage to Permanent Custodians Limited and $34,116.35 in respect of the mortgage to Ginelle Finance Pty Limited. I do not understand the basis for claiming the whole of the payout figures in respect of those mortgages. Mr Diakakis is clearly entitled to part of those amounts but not the entirety.

146 There is another difficulty associated with claiming the whole of the payout figures. Mr Diakakis became aware of those two mortgages in November 2001. No explanation has been given as to why the Ginelle Finance mortgage was not discharged until 19 November 2002 and the Permanent Custodians mortgage was not discharged until October 2003. This unexplained delay involves a clear failure to mitigate. It should have been appreciated within eight months of November 2001 that the only solution was to sell the property. Accordingly I propose to assess damages on the basis that the property should have been sold by the end of June 2002 and that the proceeds of sale would have been sufficient to discharge both mortgages as of that date.

147 I have found that Mr Diakakis was aware of and consented to the Ling mortgage which secured an advance of $200,000. That mortgage was entered on 3 November 2000. Interest was payable at the rate of 11% per annum provided payments were made on time. Payments were made on time until June 2001. Thereafter there was default under that mortgage and default interest at the rate of 14.5% per annum became payable.

148 Had payments of interest been maintained under that mortgage at the normal rate, until the transactions of 19 October 2001 paid out the mortgage, an amount of $9,167 would have been paid.

149 In fact that mortgage was varied without authorisation to secure an additional $35,000 on 5 January 2001 and another unauthorised mortgage was entered into on 15 February 2001 to secure the advance of a further $35,000. In the absence of any evidence to the contrary, I infer that it was the entry into these additional and unauthorised transactions that brought about a situation whereby Jenny and Terry Diakakis could no longer maintain payments under those mortgages from June 2001 onwards. I find that the default in payments under those mortgages occurred as a direct result of those unauthorised transactions. It follows that the obligation to pay the interest at default rates under the Ling mortgage as varied and the Chen mortgage was caused by those unauthorised transactions. It is appropriate that the persons responsible for those unauthorised transactions reimburse Mr Diakakis for that loss. 150 On discharge of those mortgages, an amount of $259,214.11 was paid to Mr Ling and $43,040.04 was paid to Mr Chen, a total of $302,254.15. Those figures were made up of the loan repayment and interest calculated at default rates. The loss suffered by Mr Diakakis as a result of the unauthorised transactions was the difference between that amount and the amount initially advanced by Mr Ling plus mortgage payments at non-­default rates, ie $209,167. The loss suffered by Mr Diakakis as of 19 October 2001 from those unauthorised transactions was therefore $93,087.15.

151 It follows that the additional loss suffered by Mr Diakakis as a result of the unauthorised transactions of 19 October 2001 was the balance of moneys advanced under those transactions, ie $95,245.85. (See para [65] hereof.)

152 No payments of interest were made under the two mortgages of 19 October 2001. Because of that default, the provisions relating to default rates of interest immediately came into effect. In respect of the mortgage for $371,000 the default rate was 10.15% per annum and in respect of the mortgage for $26,500 the default rate was 19% per annum. Accordingly the amount of interest payable up to 30 June 2002, when the property should have been sold, was $30,240. 153 I find that the whole of the interest up to 30 June 2002, payable in respect of the unauthorised mortgages of 19 October 2001 is recoverable by Mr Diakakis. Had the transactions of 19 October 2001 not been entered into, there was already default under the Ling and Chen mortgages and the property would have had to have been sold to meet those obligations in any event. Such a sale would have taken place towards the end of 2001. I have already calculated the damages to which Mr Diakakis is entitled as a result of the unauthorised aspects of those transactions.

154 It follows that the mortgages of 19 October 2001 were quite separate from those earlier transactions and the interest payable under those mortgages, up to the date When the property should have been sold, was causally related to them. It is appropriate that those responsible for those transactions should reimburse Mr Diakakis for that loss.

155 Mr Diakakis claimed the legal costs payable to RL Kremnizer & Co for the discharge of the mortgages of 19 October 2001. The need to obtain such a discharge was directly attributable to those unauthorised transactions so that Mr Diakakis is entitled to those costs, ie $1,001.

156 On behalf of Mr Diakakis a claim was made for the costs incurred in defending the possession proceedings brought by the plaintiff. A claim was also made for the costs ordered to be paid by Mr Diakakis to the plaintiff in those proceedings. In my opinion, the obligation to pay those costs was not brought about by the conduct of either Mr Grogan or Mr Cassimatis.

157 The proceedings by the plaintiff should not have been defended. There was, as Studdert J found, no reasonable defence to the proceedings. The plaintiff's mortgage was registered and there was no suggestion of any fraud on the part of the plaintiff as mortgagee. It is well established law that fraud by a person other than the party relying upon the indefeasibility that accompanies registration under the Real Property Act is not fraud within the exception referred to in s42 of that Act. The fact that the transaction which is registered is a forged document does not of itself defeat indefeasibility of title ordinarily effected by registration (Story v Advance Bank (1993) 31 NSWLR 722 at 736). There was no evidence of any personal equity in Mr Diakakis such as would provide a defence to the plaintiff's proceedings.

158 I have concluded that it was not reasonable for Mr Diakakis to defend the plaintiff's proceedings and to incur the legal costs which he now claims. In the circumstances it was not reasonably foreseeable by either Mr Cassimatis or by Mr Grogan that a consequence of the unauthorised transactions of 19 October 2001 would be that Mr Diakakis would needlessly incur legal expenses in seeking to defend the indefensible.. It is not appropriate that they be held responsible for that loss.

159 Mr Diakakis claimed the agent's commission on the sale of the property of $16,114 and legal costs on sale of $3,337.90. I find that Mr Diakakis is entitled to have those amounts included in his damages. The only issue is which of the unauthorised transactions caused the loss.

160 I have found that the reason why payments under the Ling and Chen mortgages could not be maintained from June 2001 onwards was because of the additional burden created by the unauthorised payments. I have found that even if the unauthorised mortgages of 19 October 2001 had not been entered into, the property would still have needed to be sold because of the defaults under the Ling and Chen mortgages. Accordingly I see this head of damage as causally connected to the default under the Ling and Chen mortgages and not an additional loss brought about by the default under the mortgages of 19 October 2001. In that regard I accept the submissions put on behalf of Mr Grogan.

161 Mr Diakakis also claimed as damages the legal costs incurred by him and Phillip in the purchase of the unit in Maroubra Road, the establishment fee for the loan which they entered into to enable that purchase to take place and the stamp duty which they paid in respect of that purchase. I reject that claim. That Mr Diakakis might decide to buy a unit with the proceeds of sale from the property was not reasonably foreseeable as a consequence of the various unauthorised transactions nor was it a direct consequence thereof. Mr Cassimatis

162 Mr Cassimatis made a material contribution to all of the unauthorised transactions and is consequently liable to Mr Diakakis for all of his damage as follows: Loss on Ling and Chen mortgages $ 93,087.15

Loss from 19 October 2001 mortgages $ 95,245.85

Interest payable in respect of 19 October 2001 mortgages $ 30,240.00

Legal costs on discharge of 19 October 2001 mortgages $ 1,001.00

Costs incurred on sale of property $ 19,451.90

163 The only additional issue is the date from which those amounts should bear interest. It was common ground that the rate of interest was that specified by the Supreme Court Rules, ie 9% per annum.

164 It seems to me that the loan amounts advanced under the unauthorised mortgages should carry interest from 19 October 2001, being the date upon which the actual loss was suffered, ie $90,343.34. The payment of interest under the 19 October mortgages should carry interest from 30 June 2002, ie $12,710. Interest on the costs of selling the property should carry interest from 7 October 2003, ie $5,830. Accordingly, the entitlement of Mr Diakakis to interest on the damages awarded against Mr Cassimatis is $108,883.34.

165 Mr Diakakis is entitled to a judgment against Mr Cassimatis in the sum of $347,909.24.

Mr Grogan 166 I accept the submission on behalf of Mr Grogan that he ought only be responsible for those losses brought about by the mortgages of 19 October 2001 and not for any loss suffered as a result of earlier transactions. Accordingly, his liability to Mr Diakakis is as follows: Loss from 19 October 2001 mortgages $ 95,245.85

Interest payable in respect of 19 October 2001 mortgages $ 30,240.00

Legal costs of discharge of 19 October 2001 mortgages $ 1,001.00

He is also liable to Mr Diakakis for interest on those amounts of $58,399.

167 Mr Diakakis is entitled to a judgment against Mr Grogan in the amount of $184,885.85. Mr Grogan is jointly and severally liable with Mr Cassimatis for that amount. Jenny Diakakis

168 The conduct of Jenny Diakakis materially contributed to all of the losses suffered by Mr Diakakis. Mr Diakakis is entitled to judgment against her in the amount of $347,909.24. She is jointly and severally liable with Mr Cassimatis for that amount. She is jointly and severally liable with Mr Grogan for $184,885.85 of that amount. Orders

169 I make the following orders: (i) In the first cross-claim I enter judgment in favour of Michael Diakakis against Dennis P Grogan and Lewis J Webb, trading as Grogan and Webb, in the amount of $184,885.85.

(ii) In the first cross-claim I enter judgment in favour of Michael Diakakis against Peter J Cassimatis in the amount of $347,909.24.

(iii) In the second cross-claim I enter judgment in favour of Michael Diakakis against Jennifer Diakakis in the sum of $347,909.24.

(iv) In the second cross-claim I enter judgment in favour of Nikita Diakakis and Terry Diakakis.

(v) In the third cross-claim I enter judgment in favour of Dennis P Grogan and Lewis J Webb, trading as Grogan and Webb, against Peter J Cassimatis in the amount of $138,664.38.

(vi) In third cross-claim I enter judgment in favour of Dennis P Grogan and Lewis J Webb, trading as Grogan and Webb, against Jennifer Diakakis in the amount of $166,397.26.

(vii) In the third cross-claim I enter judgment in favour of Nikita Diakakis and Terry Diakakis.

(viii) In the fourth cross-claim I enter judgment in favour of Peter J Cassimatis against Dennis P Grogan and Lewis J Webb, trading as Grogan and Webb, in the amount of $46,221.46.

(ix) In the fifth cross-claim I enter judgment in favour of Peter J Cassimatis against Jennifer Diakakis in the amount of $173,954.62.

(x) In the fifth cross-claim I enter judgment in favour of Nikita Diakakis and Terry Diakakis.

(xi) In the sixth cross-claim I enter judgment in favour of Nikita Diakakis and Terry Diakakis.

(xi) In the sixth cross-claim I enter judgment in favour of Lawcover Pty Limited. 170 The question of costs was not argued before me. I do not know whether any special costs orders are sought. Accordingly, I grant leave to the parties to approach on 7 days' notice for the purpose of seeking directions as to any argument on costs. I no approach to the Court has been made by 4pm 16 March 2007, I will proceed to assess costs on the basis of the material currently before me. **********

06/03/2007 - typographical error in date - Paragraph(s) n/a 18/05/2007 - renumbering of paragraphs to accord with original judgment - Paragraph(s) [163] - [169] 18/05/2007 - renumbering of paragraphs - Paragraph(s) [162] - [170]

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