Giordan and Sofia Margaroff v Vincent Stanizzo trading as V F Stanizzo

Civil Liability Act 2002 (NSW) LEGISLATION CITED: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW)

Chandra and Anor v Perpetual Trustees Victoria Pty Ltd [2007] NSWSC 694 Curnuck v Nitschke [2001] NSWCA 176 Gallagher and ors v Carman [1990] ATR 81 Hawkins v Clayton (1988) 164 CLR 539 Heydon v NRMA (2000) 51 NSWLR 1 Jones v Dunkel [1959] HCA 8 CASES CITED: Kolavo v Pitsiakis [2003] NSWCA 59 Nationwide News Pty Ltd v Naidu [2007] NSWCA 377 O'Brien v Hooker Homes (1993) ASC 56-217; (1993) NSW SC case no. BC 9301729 Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492 Reinhold v NSW Lotteries Corporation (No 2) [2008] NSWSC 187 Sydney Water Corporation v Turano [2009] HCA 42 Vinidex Tubemakers Pty Ltd v Thiess Contractors Pty Ltd [2000] NSWCA 67 Winnote Pty Ltd v Page [2006] NSWCA 287

TEXTS CITED: 'Professional Liability', Jackson and Powell, 6th ed., 2007. 'Professional Liability in Australia', Walmsley, Abadee and Zipser, 2nd ed., 2007.

PARTIES: Plaintiff: Giordan and Sofia Margaroff Defendant: Vincent Stanizzo trading as V F Stanizzo

COUNSEL: Plaintiff: Mr J O'Sullivan Defendant: Mr S Kerr SC

SOLICITORS: Plaintiff: Autore and Associates Defendant: Yeldham Price O'Brien Lusk Lawyers

1 The plaintiffs seek damages from the defendant. The defendant is a solicitor practising in Wollongong. The plaintiffs instructed him as their solicitor in 2004 to prepare a caveat to protect their interest in their home at 7 Overhill Road, Primbee ("the property") near Wollongong in NSW. They had lived there for about 19 years. The title to the property had been in the name of their daughter Lilya Mustakov ("Lili") since it was purchased in 1987.

2 The plaintiffs had another daughter, Elen Chapman ("Elen"). At the time the plaintiffs saw the solicitor, both daughters had had matrimonial difficulties. They had also had financial difficulties. Prior to the plaintiffs' instructions to the solicitor, the daughters had borrowed up to $200,000 against the security of the value of the property. The plaintiffs were concerned about their interest in the property and wished to secure it.

3 After instructing the defendant solicitor to prepare a caveat, the plaintiffs paid for registration of the caveat. The caveat was prepared but not registered.

4 The property was transferred from Lili's name to Elen's name. Elen borrowed a further $180,000 against the security of the property. She went bankrupt. The property was sold in December 2007 for $315,000. The total debts secured against the property were then $380,000. The plaintiffs received nothing from that sale. They now sue the solicitor for damages of $350,000.

5 The statement of claim is dated 19 June 2008. The claim is based in contract and tort. The alleged contractual breaches are based on the defendant's failure to provide proper professional services as the plaintiffs' solicitor. The defendant submits the cause of action in contract is not pleaded. Ultimately the claim in contract was not pressed.

6 The claim in tort is based on an alleged failure to take proper professional actions to protect the plaintiffs' interests.

7 Evidence was given by both plaintiffs and their daughter Elen Chapman. The plaintiffs each provided an affidavit. Lili, the plaintiff's other daughter, although present at court at various times, did not give evidence. The defendant seeks to draw a Jones v Dunkel inference against the plaintiffs based on the evidence she could have given.

9 Documentary evidence was tendered and relied on by both parties, which is referred to below. 'TB' references are to documents in the tender bundle of documents - Exhibit 5)

10 The plaintiffs purchased the property in 1987. The property was placed in Lili's name. Lili was 21 at the time of the purchase (TB2 Lili's date of birth was 25/10/1956).

11 The plaintiffs provided all the funds for the purchase of that property. At that time they were involved in the business of a supermarket as well as a farm. There were creditors and a threat (at least perceived by them) that they and their assets would be the subject of a claim. The existing mortgage on the property was discharged by the plaintiffs by 1994. No monies were contributed to the discharge by Lili.

Equitable interest capable of being protected by caveat

12 Ultimately the hearing proceeded on the basis that these matters established an equitable interest of the plaintiffs in the property which could have been protected by caveat.

13 Lili had matrimonial difficulties from about 2003. At about that time Elen wanted to borrow money for her business. The plaintiffs agreed to assist their daughters with a loan of $200,000 secured against the property. In February 2004, Lili made an application for a mortgage with PCL Finance Ltd (PCL) and the Perpetual Trustee Company Ltd. through which the loan was negotiated for $200,000 (TB2). The property was listed in a loan application document said to be Lili's 'personal financial statement'. The plaintiffs were not referred to in that loan document.

14 Of the total loan negotiated of $200,000, $95,000 was advanced to Elen (the plaintiffs' younger daughter) and $105,000 to Lili. That was done with the consent of the plaintiffs. The loan was advanced as a split loan - $95,000 to Lili and $105,000 to Elen. The purpose of the loan was stated as being to 'refinance an owner occupied residence - $95,000.' In February 2004, Lili submitted a change of registered proprietor's name stating that she was 'identical with the registered proprietor'.

15 All correspondence from the lender, PCL, and the Perpetual Trustee Company Ltd. was sent to 'Ms L Mustakov' at the address of the property or a post office box. Mrs Margaroff's evidence was that she read all mail addressed to Lili at the address of the property.

16 The plaintiffs were aware that the daughters were using the property as security for their respective loans. They were also concerned about the fact that that borrowing had occurred and their lack of security in the legal title. They wished to have their interest in the home secured. They had regarded that home as their home and they had lived in it for many (about 19 years) at that time.

17 After becoming aware of the events concerning the daughters' dealings in the property, the plaintiffs went to see the defendant solicitor to protect their interest in the property. English was not their first language. Although both were, and are, intelligent - and had taken the step when the property was initially acquired of placing the property in Lili's name - they do not present as sophisticated individuals familiar with the nuances of legal procedures.

18 There is no issue but that at the relevant time the defendant acted as the plaintiffs' solicitor. The defendant had not been the plaintiffs' solicitor on prior occasions. However, they had used at least one other solicitor.

19 Paragraph 9 of Mr Margaroff's affidavit sworn 18 August 2009 sets out what he said to the defendant at their first meeting in June, 2004: "My daughter Lili has matrimonial problems and has separated from her husband. I want to protect my house and put a caveat on my home (7 Overhill Road, Primbee) so that no-one can borrow any money against the property." In the absence of any evidence from the defendant, I accept that evidence.

20 The defendant's diary extract showed that the plaintiffs went to see the defendant at his offices on 8 June 2004 (Mr Margaroff only), 15 June 2004 (Mr Margaroff only), 17 June 2004 (Mr and Mrs Margaroff and Lili), and, on 18 June 2004 (Mr Margaroff only). The defendant's diary entries for all attendances was tendered (Exhibit 3). The daughter Lili was present at the meeting on 17 June 2004 during a one hour conference.

21 At those meetings there was discussion about the lodging of a caveat to protect the plaintiffs' interest. Later, there were discussions about the preparation of a loan agreement to acknowledge the monies advanced. The plaintiffs paid fees to enable the registration of the caveat.

22 On 8 June 2004, a costs agreement was executed between Mr Stanizzo and the plaintiffs - TB 13. On 17 June 2004, the parties attended Mr Stanizzo's office and signed a declaration of trust dated 18 June 2004 (TB 17a). On 17 June 2004 the defendant rendered a bill (TB 33) for the costs of drawing the wills, powers of attorney, a deed of acknowledgement, declaration of trust, and title searches for $1,030. That was paid.

23 Annexure A to Mr Margaroff's affidavit contains the costs agreement between the plaintiffs and the defendant, Mr Stanizzo. The precise details of the work to be performed were set out in a retainer agreement, which contained the following: '1 - to advise you in relation to your interests in 7 Overhill Rd Primbee 2 - to act in relation to a declaration of trust and all matters pertaining to your financial property interest concerning your daughter Lili Mustakov.'

24 On 18 June 2004, Mr and Mrs Margaroff signed a document as "caveators" (TB 34). Lili signed the caveat document under the heading 'Consent of Title Holder.' (TB 36 ff). At the same time, the plaintiffs signed a deed of acknowledgement of trust.

25 The plaintiffs assert that, at all times, they had an equitable interest in the property based on the fact that they had made all contributions to the initial purchase of the property and the repayments of the mortgage on the property. That mortgage was completely discharged by 1994.

26 The plaintiffs rely on the fact that Lili, the registered proprietor of the property, executed a Declaration of Trust (document 17A) acknowledging that she held the property on trust for her parents. That document was dated 17 June 2004. There is no issue about the validity of documents.

27 The intention that the property be held by Lili on trust for the parents was said to be further evidenced by Lili's will also dated 17 June 2004 (TB 22ff) acknowledging that she held the property on trust for her parents. The will was witnessed by two witnesses.

28 All those documents were prepared by the defendant.

29 Tendered as part of the plaintiffs' case was a draft caveat (Exhibit 6) also signed and dated 18 June 2004. The difference between that caveat and the document set out at TB34/35 was that the first caveat claimed a caveatable interest pursuant to "Deed of Loan dated 17 June 2004". The second caveat (TB34/35) shows the caveatable interest as being pursuant to a "Deed of acknowledgement and declaration of trust dated 17 June 2004". The plaintiffs' case is that the caveat was signed by them on or at least by 18 June 2004 (TB34/35). There is no issue as to validity of that document nor that it was properly witnessed.

30 In the absence of any evidence from Mr Stanizzo, the plaintiffs ask that an inference be drawn that there were two caveats prepared in the alternative. Further, that the evidence indicates a clear awareness on the defendant's part that a caveat had to be lodged. The caveat submitted for registration was the deed of loan (TB45ff).

31 In June 2004, Mr Stanizzo sent a letter to Legal Link, law stationers, requesting the registration of that caveat (TB 44) with the caveatable interest pursuant to the deed of loan. That was returned stating that the documents were not lodged and that OSR (Office of State Revenue) required a marking on the caveat and a deed of loan (TB 48).

32 The plaintiffs' case is that the solicitor was negligent in failing to ascertain whether or not stamp duty was payable and in not pursuing that registration.

33 In July 2004, Elen went to the defendant's office and sought and received a copy of the Deed of Loan.

34 On 17 November 2004, Mr Stanizzo sent a letter (TB 22) to Mr Margaroff stating the caveat had not been registered and asking that the plaintiffs arrange for Elen to come to the defendant's office and sign the deed '…to allow registration of the caveat'.

35 Sometime thereafter Mr Margaroff asked Elen to go to the solicitor's office to sign the Deed of Loan. She said she would. She did not. The plaintiffs thereafter believed that the caveat had been lodged. They did not receive any letters or calls from the defendant thereafter. Mr Margaroff said that he was distracted thereafter by his declining health.

36 In November 2004, Lili sought and obtained approval for a variation of the loan. There was an annotation to the loan document at that time in Lili's handwriting saying 'A Loan, B Loan, C Loan, caveat - ???'. The plaintiffs rely on that as part of the submission that Lili, as well as the plaintiffs, was told and was aware of the need for a caveat.

37 Lili also borrowed additional funds in February 2005. That was said to be without the knowledge or consent of her parents, the plaintiffs. In May 2005, Lili obtained a valuation of the property by Valuers Illawarra for $367,500.

38 Lili's interest in the property was subsequently transferred to Elen on 18 April 2006. That transfer was registered 29 April 2006. The plaintiffs' case is that that transfer was not known to them until December 2006 (document 45 TB 106/107) when a Notice to Occupier was served.

39 At the time of the transfer, Elen was operating a business known as "Stretch and Grow" and was apparently involved in the selling of related business franchises. In February 2006, an application was made by Elen through Smart Link Finance and Liberty Funding (TB 77) 'to purchase a property off her sister 90% lodoc loan he (sic) has'.

40 The contract for the sale of the interest in the property is shown at TB 83 ff. Elen, in turn, used that property as security for a loan to another finance organisation (mortgage - TB 87). Elen defaulted on the loan and a default notice issued (TB 89) as a result of proceedings taken in the Supreme Court - full details of which are set out in the annexures by the finance company to Mr Margaroff's affidavit. The plaintiffs assert that that was the first time they were aware that the property was in the name of their daughter Elen.

41 In June 2006, Elen Chapman failed to make a payment to the Liberty Finance loan organisation. She was issued with a default notice in August 2006 and declared bankrupt in November 2006 on a Debtor's petition (TB 98). Foreclosure proceedings were then commenced against her. That included the service of a Notice to Occupier on the plaintiffs together with a Statement of Claim (TB 99) naming Elen Chapman as the defendant (TB 106).

42 The property was sold on 4 February 2008 for $315,00 to an independent third party. The transfer was affected by the mortgagee pursuant to a power of sale.

43 The plaintiffs contacted a new solicitor. Another caveat was prepared by Mr Margaroff's current solicitor showing him only - not Mrs Margaroff - as the caveator (TB 93). It was dated 19 October 2006 and lodged on 20 October 2006 - in other words, after the date of the loans to Lili and Elen Chapman.

45 The statement of claim is based on what is asserted to be a breach of contract and tort. The plaintiffs' case is that they approached the defendant, who was a practising solicitor who held himself out to be able to act for them in this area, to secure their interest in the property. The plaintiffs assert that the original purchase of the property was carried out in the name of the plaintiffs' elder daughter, Lili, as trustee for them; further, that she held her interest subject to a trust for them. That was denied.

46 Mr Margaroff's evidence was that he had previously been advised by another solicitor who, he said, had advised him to put the house in his daughter's name. That solicitor was not called.

47 Mr Margaroff was, at the time he asserts the property was held for him by Lili, receiving a Social Security pension. He did not include that interest, whatever it was, as part of his declaration of assets when he applied for, or was continuing to receive, the pension.

48 Mr Margaroff said that he was aware that his two daughters, Lili and Elen, had borrowed money against the property - Lili the amount of $105,000 and Elen the amount of $95,000. He said that neither he nor his wife had given them permission to take any more and that he didn't find out for three years that they had in fact used the property to borrow more funds against the security of the property.

49 There is a conflict in the evidence between Mr Margaroff (and, at least inferentially, that of his wife) when compared to the evidence of their daughter, Elen Chapman. That conflict essentially relates to the contents of paras. 4 and 5 of Mr Margaroff's affidavit sworn 18 August 2009 and the statement of Ms Elen Chapman (Exhibit 4) para 3. The material issue is whether at the time the additional borrowings were made against the property (the period March - April 2004), Mr Margaroff was or was not aware that the property was in Lili's name.

50 Elen gave evidence that she went to see her father in March 2004 for further funds and that she 'borrowed $95,000 in her sister's name'. She explained that phrase by saying that the forms to obtain the additional monies were taken out in Lili's name, Lili knew that the forms were being filled out to that end.

51 Ms Chapman also gave evidence that she had approached her parents for funds earlier on and that she had in fact used the property as security for an earlier overdraft in the period 2002 - 2003. She said that the amount borrowed ($50,000) was fully paid out by 2003. Ms Chapman said that she was not aware of any monies being borrowed against the house in 2004 and that when she, Elen, became aware that Lili had borrowed against the property she told her parents immediately within a period of about 3 days. Ms Chapman said that she was shocked that her sister had borrowed the money against the property and admitted in cross-examination that she would never do that. However, notwithstanding that attitude, she agreed that she borrowed a further sum of $270,000. The full extent of the borrowing was $380,000 of which $270,000 went to her. She also agreed she did not tell her parents of that borrowing at the time. She said she knew that there was a caveat in existence at that time and agreed that what she had done was to effectively put her father and mother in the situation where they would have to either withdraw or release that caveat so that the borrowing could take place.

52 While Mr Margaroff may not have known the precise nature of a caveat he was adamant - and I accept - that what he was doing in approaching the defendant was to ensure his and his wife's existing interest in the property was protected such that there could not be further borrowings by his daughters. Mr Kerr SC submits that the plaintiffs could have sought that the property be transferred into their names. There may have been reasons why they did not want to do that or to change the title arrangements that even at that stage, would have been in place for some years. But more importantly their specific instructions were to protect their interest as was reflected in the terms of what they said (which in this respect I accept) and the wording of the documentation (including the draft caveat), which was prepared.

53 The plaintiff's claim in negligence is based on the alleged breach of the defendant's duty of care to them, firstly, in failing to lodge a caveat as specifically instructed, or, if that is not established, by failing to pursue actions that any prudent solicitor would do, namely, to advise the client of the best course of action to protect their interest in the property; and, secondly, to take proper and expeditious steps to register the caveat in all the circumstances.

54 The plaintiffs also submit that the defendant also had a duty as a solicitor to inform the plaintiffs of the nature of their claim and to have taken steps to ensure that, notwithstanding the delays by Elen Chapman in signing the document, that the caveat was registered. The crucial date in this regard is the period between when Elen collected the draft deed from the defendant's office and the solicitor's follow-up letter of 17 November 2004.

55 The plaintiff further alleges negligence by the defendant, namely, that in sending the caveat to be registered by the Law Stationers, he accepted the position that the caveat should not need to be stamped. The plaintiffs' case is that no stamp duty was payable in these circumstances given that the equitable interest had been created, it is asserted, at the time of the purchase of the property.

56 The plaintiffs' case is that the defendant should have been aware of this as a competent solicitor.

57 The defendant's primary submission is that whatever liability there may have been ceased by virtue of a break in the relevant chain of causation. That break was constituted as a result of the plaintiffs' inaction once they found out in November 2004 that the caveat had not been registered. That inaction was further compounded by virtue of the plaintiffs' knowledge of 'what their daughters were doing' or alternatively, that the evidence suggests that the plaintiffs would have allowed Elen to borrow against the property in any event.

58 The plaintiffs knew from the defendant's letter of 17 November 2004 that the caveat had not been registered. By that time, Lili had approval for a further loan and, in fact, obtained the additional borrowed monies in February 2005.

59 Thereafter the defendant took no further action. Mr O'Sullivan submits that, in the circumstances and where the defendant solicitor has not given evidence, I should infer that the defendant had simply forgotten to follow the matter up until his failure to register the caveat was brought to his attention in October 2006.

60 The plaintiffs did not press the matter any further thereafter until November 2006 when they received the Notice to Occupier. In my view, the plaintiffs' inaction needs to be looked at in terms of what else was occurring at that time - particularly in terms of their health and all the matters concerning their daughters' respective matrimonial and financial problems. In any event, the failure to register the caveat was the cause of the losses suffered by the plaintiffs in that that enabled the registration of the transfer of the title.

61 In support of that application the plaintiffs rely on a valuation report dated 18 June 2009 and prepared by a Mr Max Bell, a valuer. I understand that the valuation report was served on or about 25 June 2009. It did not comply with the rules relating to expert evidence. A covering affidavit of John Maxwell Bell dated 2 September 2009 was served on the defendant on the first morning of the hearing. The defendant opposed the filing of the affidavit or reliance on it.

62 There was a preliminary issue raised at the commencement of the proceedings on 2 September 2009 as to the state of valuation evidence said to be relevant to the claim for damages. Procedural orders were made on those matters that: (a) The plaintiffs have leave to amend the Statement of Claim;

(b) The plaintiffs file and serve the affidavit of Mr Bell sworn 2 September 2009;

(c) The plaintiffs pay the defendant's costs thrown away of the hearing.

63 When the matter returned to court on 2 November 2009 the parties announced the following agreed facts:

(i) The property was sold in December 2007 for $315,000;

(ii) If there was a finding of liability against the defendant, then the defendant will argue the starting point for damages is $315,000;

(iii) The plaintiff will argue that the limit the value of the property as at the date of the hearing is $390,000.

This agreement obviated the need to call any or further valuation evidence.

64 At the conclusion of the first day of the hearing, I outlined to the parties the implications of the matter proceeding, in particular, that there may be findings of credit involving, firstly, the plaintiffs as persons who have fraudulently claimed social security benefits in that they did not assert that they owned the interest in the property now relied on and, secondly, the defendant as a practising solicitor.

65 The defendant attacked the credibility of Mr Margaroff by reference to the following matters: a) On his evidence, when he initially purchased the property, he followed advice, allegedly from a former solicitor, that he put the property in his daughter's name, to protect himself from a claim from another potential creditor;

b) On his evidence, he owned what he asserted to be an interest in the property at the same time he had not declared that interest when he applied for, and continued to receive, a social security pension;

c) On his affidavit, that he had put the property in his daughter's (Lili's) name when she was going through matrimonial proceedings.

66 The defendant did not give evidence. Neither did the plaintiffs' other daughter, Lili. Both counsel submit that Jones v Dunkel inferences should be drawn against the other party in those circumstances. Mr O'Sullivan submits that the defendant would have had to admit that he did not do anything until late 2006 when contacted by the plaintiffs' new solicitor. Mr Kerr SC submits that Lili's evidence would have been that her parents knew about the loans that were being given. That was not consistent with the denial of the same matter by Elen.

67 The relevant duty on a solicitor, both in contract and in tort, requires the solicitor to exercise reasonable care in the provision of services; the standard of care and skill is that which may be reasonably expected of practitioners - Heydon v NRMA (2000) 51 NSWLR 1 at 146; Kolavo v Pitsiakis [2003] NSW CA 59 at [55] - [56]. A duty extending beyond the confines of the retainer is more likely to be implied where the solicitor is acting for people of limited means, education and understanding : Gallagher and ors v Carman [1990] Aust Torts Reports 81-011 at 67,665. A further specific obligation is to warn the client of material inherent risks : Heydon v NRMA Ltd at [145]. In Hawkins v Clayton (1988) 164 CLR 539 at 579, Deane J held that a solicitor's duty of care may require the taking of positive steps beyond the specifically agreed task or function to avoid a real and foreseeable risk of the client sustaining economic loss - see also Curnuck v Nitschke [2001] NSWCA 176. But as to whether there can be an ongoing breach see Heydon v NRMA Ltd at [147] and also Winnote Pty Ltd v Page [2006] NSWCA 287 at [84].

68 In terms of the scope of the duty a solicitor should warn his client about risks that the client may not appreciate including the effect of a particular transaction - O'Brien v Hooker Homes (1993) ASC 56-217; (1993) NSW SC case no. BC 9301729 per Bryson J. See also 'Professional Liability' Jackson and Powell 6th ed., 2007 at [782] - [783] : 'Professional Liability in Australia' Walmsley, Abadee and Zipser 2nd ed., 2007 at 465.

69 The plaintiffs sought advice from the defendant as to their interests in the property. The terms of the costs agreement were that the defendant was to: 'advise in relation to your interest in (the property), to act on declarations of trust and all matters pertaining to your financial and property interest with my daughter Lili Mustakov.'

70 The issue then arises as to what their instructions were and what the solicitor's duty was against that background.

71 Mr Margaroff (at least) wanted to ensure that there was no further borrowing beyond the $200,000 already borrowed on the property at the time of the initial conference. He was then deceived, at least by his daughter, Elen, who had the property transferred to her name. The effect of her evidence was that she wanted to present her parents with a 'fait accompli' given her professed knowledge of their expressed reluctance to jeopardise their home. Both daughters had clearly taken advantage of their parents' love for them and used the situation including the transfer of the title to the property and the subsequent borrowings by both Lili and Elen to the detriment of their parents. Elen (at least) knew that that level of borrowing would effectively eliminate the parents' financial interest in the home. Elen at least relied on her parents total devotion to her and her ongoing welfare such that she anticipated that they would not prevent any action being taken which might prevent her from utilising the property as security for her additional borrowings. Both daughters' borrowings against the property effectively reduced their parents' interest in the property to nothing.

72 The defendant knew after his conferences with the plaintiffs and Lili that the property was, and had been, the home occupied by the plaintiffs for some time, and that it was registered in Lili's name. Further, he must have known that, given their instructions, and absent any issues of advancement, the plaintiffs' interest was capable of being regarded as - and protected by caveat as - an equitable interest. The existence of this interest was ultimately not contested by the defendant. Further, the defendant knew that the plaintiffs' interest - and any caveat - would not be challenged by Lili. That was the purpose of preparing the deeds and acknowledgements.

73 The solicitor initially did what he was instructed to do in terms of preparing the two acknowledgements and associated caveat documents. He then submitted the document for registration.

74 Here the relevant duty for the solicitor in the circumstances of this case was to first, register the caveat and, secondly, to advise the plaintiffs about the ongoing effects of the failure to lodge the caveat.

75 The issue then arises as to whether the defendant was obliged to take further action given the difficulties that arose when what was needed was a signed acknowledgement of loan. The defendant wrote asking for Elen to come in and sign the document. Absent the finalisation of the registration, the plaintiffs' interests in the property thereafter remained unprotected. Their daughters had clearly used the property as security for loans at various times. The defendant was paid fees for the registration of the caveat. He did not ensure that occurred. Subsequent advances made would - and did - inevitably affect the plaintiffs' interests. The duty of care in tort is dynamic and changes constantly according to what is foreseeable during the currency of the relationship where there is the requisite proximity.

76 This case raises for consideration the extent and scope of a solicitor's duty to inform his clients of the consequences of inaction on their part. The solicitor presumably had a file review management practice that prompted the letter of 17 November, 2004. He also advised the client that the caveat had not been registered. However he did nothing thereafter to follow the matter up. His letter did not set out the consequences of inaction. The matter appears to have been left in abeyance. The real possibility (which ultimately eventuated) was that the daughters would continue to use the property as security for a loan. That was, in all the circumstances, foreseeable - a conclusion relevant to all three stages of the analysis as to liability: Sydney Water Corporation v Turano [2009] HCA 42 at [45]. Viewed in the light of the background of the plaintiffs and their circumstances, what occurred was not an obvious risk to the plaintiffs nor an inherent risk of which they should have been aware.

77 The scope of the duty to exercise professional care and skill and whether there has been any breach of that duty needs to be considered in all the circumstances of the professional solicitor and the client and the particular matter the subject of the professional advice and instruction. Here the defendant was dealing with relatively elderly clients for whom English was not a first language and who were relatively unsophisticated. Mr Margaroff was in poor health. They were beset by their daughters' matrimonial problems, the property conflicts in which they were engaged and the need of those daughters to provide, in turn, for their own children as well as, at least in Elen's case, her financial difficulties associated with her franchise business - which failed shortly thereafter. In the context of those circumstances and those clients, the defendant solicitor had a duty to specify the consequences of a continuing failure to register the caveat and to meet the instruction to register the caveat.

78 I find that the solicitor owed the plaintiffs a duty of care to prepare and file the caveat protecting their interest in the home and to ensure that it was registered. The interest on the home capable of being protected by caveat at the time the parties went to see the solicitor was the value of the home less the outstanding loan at that time - $200,000. Further, I find that the defendant had a duty to bring to the plaintiffs' attention that their interest in the home remained unprotected against other dealings in, or in relation to, the property as long as that caveat was not registered. I accept Mr Margaroff's evidence that he wanted to ensure that there could be no further borrowings over and above the existing debt of $200,000. I also accept that Mrs Margaroff had that intention and that he informed the solicitor of the concerns he had of the daughters' circumstances.

79 I do not accept that the plaintiffs or either of them knew of their daughters respective borrowings nor intentions to borrow more than the debt level of $200,000 as at the date of instructions given to the defendant nor that they would have agreed to any increased loan level nor to have the title to the property in which they had lived for many years to be utilised as security for further borrowings.

80 To the extent relevant in relation to my consideration of questions of apportionment, I also find that Elen, at least, was aware of that intention. I find that she organised the loans she did on the basis of using the property as security so that her parents would have no choice but to acquiesce in the utilisation of the property in that way.

81 What the defendant did was not enough to protect the plaintiffs' interests in the property. While he also reminded the plaintiffs that their daughter Elen had not signed the loan acknowledgement he did not take it further than that. He took no effective action in the period after June 2004 and 17 November 2004 to register the caveat. It was during that period that Elen took the actions she did which effectively increased the borrowings on the security of the property such that the plaintiffs had no equity left.

82 I find that the defendant breached that duty and that the plaintiffs suffered loss as a result of that breach. I do not accept that the delay that occurred and the knowledge of the plaintiffs in November, 2004 broke the chain of causation.

83 The general principle is that the damages will be assessed at the date the duty is breached. The extent of the loss was the loss of the plaintiffs' net interest in the home at the time of the act of negligence. The home was sold at auction in December 2007 for $315,000 at which time the total borrowings against the property were $380,000. The plaintiff argues that it was a 'forced' or mortgagee sale and that therefore its true value was not realised. There is no evidence to that effect.

84 It is further argued that the plaintiffs lost a potential subdivisional benefit that could have been realised on the property. The possibility and costs of subdivision and the absence of relevant evidence was the primary matter that led to the adjournment.

85 Again there is no evidence on those matters - although there is an agreement that at the present time the property would be worth $390,000. Not only is the evidence silent on what events, if any, have occurred in the intervening period to affect the value of the property, there is no evidence as to all the direct and indirect costs of subdivision nor the likelihood of sale following any subdivision.

86 There is also evidence that would suggest that, even if there was such a potential, the plaintiffs would not have been able to actively pursue such an option. Mr Margaroff was at the relevant time a person with considerable health problems including having had a quintuple coronary artery by-pass in June 2005, as well as suffering depression and insomnia. Although he may have been in business in earlier years, he was, at the time, on the pension and, in his words (affidavit [21]) he was in a state of 'declining health'. Mrs Margaroff was also a person of mature years who had been clearly upset by what had occurred. Neither were people who would have had the energy to pursue the subdivision that is now said to have been contemplated.

87 I find that that the value of the home at the time of sale - which effectively crystallised the loss of the plaintiffs at that time - was $315,000. However, what needs to be offset against that amount is the sum of $200,000, which was the level of indebtedness at the time of the act of negligence. The loss is the difference which would otherwise not have occurred had the solicitor done what he was instructed and paid to do, that is the value of the property less the $200,000 outstanding on the property at that time.

88 Accordingly I find the loss suffered was $115,000.

89 Section 34 of the Civil Liability Act 2002 provides for apportionable claims in claims for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care. Section 35 provides for proportionate liability for apportionable claims if liability of a defendant is established in circumstances where that defendant is a concurrent wrongdoer. The Court needs to consider an amount that reflects the proportion of the damage or loss claimed which the Court considers just "having regard to the extent of the defendant's responsibility for the damage or loss".

90 "Concurrent wrongdoer" in relation to a claim is defined as: "… a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim."

In apportioning responsibility between defendants, ss35(3) requires the exclusion of the proportion of damage or loss in relation to which the plaintiff is contributory negligent. The Court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. Here there is no issue but that the plaintiffs were aware of the identity of their daughter(s) and their circumstances and the circumstances that might have made Elen, at least, a concurrent wrongdoer.

91 Both counsel rely on the decision of Bryson AJ in Chandra and Anor v Perpetual Trustees Victoria Pty Ltd [2007] NSWSC 694. Mr Kerr SC for the defendant urges such a finding given the circumstances of the actions of the daughters Elen and Lili. He submits that the evidence establishes that the daughters took out the loans they did which was the cause of the loss to the plaintiffs. They did so in circumstances where they relied on their parents' devotion towards them meaning that they (the parents) would not have insisted on the registration of the caveat such that the loan negotiated by them would have been approved.

92 Mr Kerr SC submits that a finding of the order established in Chandra would be appropriate. Any greater finding of comparative responsibility on the solicitor's part (in other words more than 10%) would elevate the solicitor's involvement to a greater degree of responsibility than the daughters. He submits that the daughters are the persons who are primarily responsible for the losses given their unauthorised borrowings.

93 Mr O'Sullivan for the plaintiffs submits that the defendant was the person primarily responsible for the losses and accordingly I should find that he was responsible for all or at least a substantial proportion (90%) of the losses suffered by the plaintiffs.

94 Mr O'Sullivan also submits that this case is different from Chandra in that here the solicitor was not deceived by anybody. The defendant had clear instructions from the plaintiffs themselves. What he should have done was to prepare and register the caveat. That was the specific and primary purpose for which the plaintiffs came to see him and of his instructions.

95 Both counsel submit that both daughters had deceived their parents

Issues arising from Chandra and Anor v Perpetual Trustees Victoria Pty Ltd

96 Given the focus by both parties on this aspect of the case and on this authority, it is appropriate that I detail some of the matters that I regard as relevant in determining the current matter. The plaintiffs, Mr and Mrs Chandra, sued amongst other people a solicitor, Mr Miller. He had been approached by a fraudulent person, Mr Pan, who falsely claimed to be authorised by the plaintiffs to act for them. Mr Pan asked Mr Miller to apply for a new duplicate Certificate of Title. The solicitor prepared the application for the new Certificate of Title and the supporting declaration and gave those documents to Mr Pan. Mr Pan returned them, apparently completed by the plaintiffs, and witnessed by a justice of the peace. Neither Mr nor Mrs Chandra had anything to do with that document and, indeed, had never met Mr Miller.

97 Mr Miller lodged the application for the Certificate with the Land Titles Office. He ultimately collected the new Certificate of Title and gave that to Mr Pan. He prepared a memorandum of fees directed to the plaintiffs and gave that to Mr Pan who paid it. Mr Miller had no other part in the transactions which led to the delivery of the forged mortgage with the new Certificate of Title nor with the other false documents provided to the first defendants the mortgagees nor with the two advances which were made pursuant to that mortgage. The case proceeded on the basis that there was no issue but that the solicitor owed the plaintiffs a duty of care to prevent economic loss being caused to them by his conduct purportedly on their behalf.

98 Bryson AJ held that the negligence of the solicitor was in accepting that Mr Pan actually had the authority of the registered proprietors to give instructions in both obtaining the new Certificate of Title receiving it and then handing it over to Mr Pan.

99 Against that background Bryson AJ considered the proportionate liability provisions of Part 4 of the Civil Liability Act and, in particular, s35(1) of the Act. Mr Pan was although clearly not a party to the proceedings. Mr Miller's liability was limited because his actions were not intended - see paras 110[ff]. Mr Miller's liability was found to be 10% of the plaintiffs' loss.

100 The approaches to apportionment under contributory negligence statutes are also generally applicable to apportionment among wrongdoers. Blameworthiness and causative potency are recognised as determinants of responsibility, matters which are both relevant to contributory negligence cases and tortfeasor contribution cases - Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492, 493-4; Nationwide News Pty Ltd v Naidu [2007] NSWCA 377 per Beazley JA in at [278] and Vinidex Tubemakers Pty Ltd v Thiess Contractors Pty Ltd [2000] NSW CA 67 at [29]. Matters which are also relevant are which of the wrongdoers was more actively engaged in the activity causing loss and which was more able effectively to prevent the loss happening - Reinhold v NSW Lotteries Corporation (No 2) [2008] NSWSC 187 per Barrett J at [58]. That involves an assessment of the degree of departure from the standard of care and the relative importance of the respective acts.

101 Here I have regard to the matters specified in s34 and the criteria relating to the questions of proportionate liability under s35 and the comparative responsibility of any concurrent wrongdoer. In my view, the concurrent wrongdoer was (at least) Elen Chapman. Lili was not called to give evidence by the plaintiffs although she was in Court in the early stages of the hearing. On Elen's evidence (Elen Chapman's statement at [5], Lili told her in 2005 or 2006 that she, Lili, could not keep up the payments on the house and that it would be lost. Mr Margaroff knew of Lili's level of indebtedness at that stage.

102 Counsel for the defendant specifically submits that the plaintiffs should not be regarded as concurrent wrongdoers in these circumstances.

103 The actual act of negligence by the defendant solicitor was in not proceeding to ensure that the caveat was registered. Once that negligence occurred, the failure to ensure the registration of the caveat enabled Elen Chapman to increase the loan on the security of the property to the full amount i.e., from $200,000 to $380,000.

104 It was the unauthorised registration of the title in Elen's name and her utilisation of that title and the security of the property (to which she had made no direct contributions) that thereafter led to the loss. Although Elen went bankrupt and was a daughter of the parties, it is clear that the financial strength or profitability of a party is not to be taken into account in assessing contributions or apportionment nor is her situation nor status relevant - Reinhold op cit. at [58].

105 The act of negligence was pivotal in enabling the registration of the transfer of title. It was the specific matter that the defendant was instructed to carry out. It was a more important matter in the overall scheme of what occurred than was the case in Chandra - although it has to be noted that, in that case, the production of the certificate of title was what enabled the wider fraud to be committed. Further, the solicitor in Chandra had not met the plaintiffs but was deceived by another. Here the defendant solicitor was not deceived. He was specifically instructed to protect the plaintiffs' interests. He knew that the plaintiffs were concerned about the daughters' level of borrowing. On the other hand, Elen was aware of her parents' situation, their respective ages and medical conditions and their love for her - which she manipulated against them to their detriment.

106 Under the provisions of s 35(3) of the Act, I am required to exclude the proportion of the loss in relation to which the plaintiffs are or have been contributorily negligent. For these purposes therefore I do not take into account the fact that the plaintiffs did not take any effective action themselves not only to ensure Elen signed the relevant deeds but also to follow the matter up themselves in the period after November, 2004. Again, these matters need to be considered in the light of the plaintiffs' respective circumstances and levels of knowledge as I have outlined earlier as well as the stronger causative force of the defendant solicitor's acts and inactions and the greater culpability of Elen.

107 Against the background of the principles, criteria and matters set out above, I hold that the responsibility should be equally assessed as between the solicitor and Elen Chapman.

108 I find that the defendant owed the plaintiffs a duty of care to have registered a caveat that would protect their equitable interest in the property. That duty extended to advising them that their interests in the property would not be protected as long as their daughter Elen did not sign the deed of acknowledgement that had been prepared for her to sign. Further that that duty was breached. The loss suffered by the plaintiffs was $115,000. The apportionment of those losses should be of the order of 50%. Accordingly, the defendant should pay the plaintiffs the sum of $57,500.

1. Judgment for the plaintiffs against the defendant in the sum of $57,500.

3. Interest on the judgment amount in the sum of $10,914.

4. That the defendant pay half the plaintiffs' costs of, and incidental to, the proceedings on the usual basis from which should be deducted the costs of the defendants thrown away as ordered on 3 September 2009.

109 The parties have not made submissions on costs. It may be that there are matters that should be brought to my attention on the question of costs after delivery of these orders and reasons. I do not know what if any action has been or may be proposed against Elen and the circumstances of her bankruptcy. However, clearly I need to be alive to the issue of Elen's position as a daughter of the plaintiffs and the realities and relevance of her involvement and actions.

110 I will hear the parties on this at a time convenient to the parties any morning at 9:30 am prior to any trial or hearing in which I am engaged. In the absence of submissions and matters being brought to my attention within seven days of the date of this judgment - in addition to evidence of the parties' attempts to agree on costs - the orders I would propose are that the defendant should pay half the plaintiffs' costs of and incidental to the proceedings on the usual basis from which should be deducted the costs of the defendant thrown away as ordered on 3 September 2009.

111 Following the delivery of these orders and reasons, the parties agreed with the costs orders as outlined above and to the interest figure set out in accordance with s 100 of the Civil Procedure Act 2005, rule 36.7 and schedule 5 of the Uniform Civil Procedure Rules 2005 from 21 December 2007, being the day after the property was sold and the plaintiffs' loss crystallised as well as the alteration of the judgment amount in accordance with the slip rule.

20/11/2009 - The amount of $67,500 was amended to $57,000 on the cover page, in paragraph 108 and in the first order. Two additional orders and paragraph 111 were included. - Paragraph(s) 108 and 111

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