Lee v Elgammal

The Claims Made by the Client

1. Much turns on the way in which the Client's case against the Solicitor was pleaded and the way in which the trial was conducted in the District Court. It is therefore necessary to say something about both of those matters.
2. The Client filed a statement of claim in the District Court on 24 February 2014. On 13 May 2015, the first day of the trial in the District Court, the Client filed an amended statement of claim in Court, in which he pleaded an "alternative" case. In the Solicitor's defence to the amended statement of claim, also filed in Court on the first day of the trial, most of the allegations made in the amended statement of claim were admitted. While the Solicitor did not object to the filing of the amended statement of claim, he asserted in his defence that, because of the admissions made in it, the "alternative case" did not arise.
3. The allegations made in the amended statement of claim, as admitted by the Solicitor (with the proviso as to the "alternative case"), may be restated as follows: 1. In November or December 2007, Adam approached the Bank for the purpose of obtaining a loan for the Customer. 2. […] 3. The Client agreed to act as guarantor for the Loan to the extent that his liability was limited to the value of a taxi plate owned by him (the Taxi Plate), being $350,000, or alternatively, to the sum of $230,000.[see below] 4. On or about 7 April 2008, the Client approached the Solicitor for the purpose of retaining him to provide advice in respect of his liabilities and obligations under the Guarantee and the Solicitor agreed to, and did, act as the Client's solicitor in advising the Client as to his liabilities and obligations under the Guarantee (the Contract of Retainer). 5. It was an implied term of the Contract of Retainer that the Solicitor would: 1. exercise due care, skill and diligence in acting for the Client in respect of the Guarantee; 2. act in a competent manner in undertaking and performing instructions given to him by the Client; 3. not act contrary to the Client's instructions; and 4. act in a manner that would not expose the Client to unnecessary loss and damage. 1. It was an express term of the Contract of Retainer that the Solicitor was required to certify that he was a legal practitioner instructed and employed by the Client, being independent from the Bank, and to satisfy himself that the Client appeared to understand the nature and effect of the obligations imposed by the Guarantee (the certification). 2. At no time did the Solicitor advise the Client that his liabilities and obligations under the Guarantee would extend beyond the value of the Taxi Plate or, in the alternative, beyond the sum of $230,000. [see below] 3. Contrary to the Solicitor's instructions and the certification, the Solicitor did not provide any advice to the Client in respect of the Guarantee but merely witnessed his signature. 4. The Solicitor certified that he had explained the effect of the Guarantee to the Client and that the Client had understood the effect of the Guarantee. 5. The Client paid the Solicitor $100 for legal services and advice. 6. On or about 25 November 2011, the Customer defaulted on its payments under the Loan. 7. On or about 12 April 2012, the Bank demanded that the Client pay all money, interest and charges outstanding under the Loan (the Guarantor Demand). 8. The amount claimed by the Bank was $346,876.22 (the Guaranteed Amount), such amount being in addition to the Taxi Plate or in the alternative in addition to the sum of $230,000. [see below] 9. On or about 10 July 2013, the Bank obtained default judgment against the Client for the Guaranteed Amount plus interest. 10. […] 11. It was a term of the Contract of Retainer that the Solicitor would advise the Client in respect of the Guarantee. 12. […] 13. By reason of the matters referred to in paragraphs 9 and 10 above, the Solicitor breached the express and implied terms of the Contract of Retainer (pleaded at paragraphs 7 and 8 above) by failing to advise the Client in respect of the Guarantee and failing to perform the functions required of him pursuant to the certification. 14. The Solicitor owed the Client a duty of care. 15. The Solicitor acted negligently in undertaking his duties under the Contract of Retainer as the lawyer for the Client in respect of the Guarantee and in breach of the duty of care owed to the Client.
4. More particularly, paragraphs 5, 9 and 15 of the amended statement of claim were in the following terms: 5. The [Client] agreed to act as the guarantor for the Loan to the extent that his liability was limited only to the value of [the Taxi Plate] being $350,000 or alternatively to the value of $230,000. […] 9. At no time did [the Solicitor] advise [the Client] that his liabilities and obligations under the Guarantee extended beyond the value of the Taxi Plate[] or in the alternative extended beyond the value of $230,000. […] 15. The amount claimed by [the Bank] pursuant to the Guarantor Demand was $346,876.22 (the Guaranteed Amount) such an amount being in addition to the Taxi Plate[] or in the alternative in addition to the value of $230,000. The words in bold were the amendments made by the amended statement of claim to raise the "alternative" case.
5. In the Solicitor's defence to the amended statement of claim, the following answers were given to paragraphs 5, 9 and 15: 5. As to paragraph 5, he: 5.1 admits that [the Client] agreed to act as guarantor for the Loan to the extent that his liability was limited only to the value of [the Taxi Plate] being $350,000; and 5.2 in the premises of paragraph 5.1 above, says that the pleaded alternative does not arise. […] 9. He admits paragraph 9, save that in the premises of that admission and of paragraph 5 of the Amended Statement of Claim and paragraph 5.1 above, the pleaded alternative does not arise. […] 15. He admits paragraph 15 and says in further answer to the paragraph: 15.1 [the Taxi Plate] was security for [the Client's] obligation to pay [the Bank] the Guaranteed Amount (pursuant to [the Guarantee]); 15.2 the [Client] was in fact liable to [the Bank] in respect of the Guaranteed Amount; 15.3 the Guaranteed Amount was less than the then value of the Taxi Plate[]; and […] 15.4 in the premises of paragraph 5.1 above, the pleaded alternative does not arise. The highlighted material was the Solicitor's somewhat equivocal reservation in relation to the Client's "alternative" case.
6. The Client's claim for damages is critical. The amended statement of claim asserted the following in paragraph 23: As a result of [the Solicitor's] breach of the Contract [of Retainer] and breach of the Duty of Care as pleaded at paragraphs 7, 8 and 20 [the Client] has suffered loss and damages: Particulars [The Client's] best estimate of the loss and damage suffered, or likely to be suffered, is in an amount of at least $500,000. The allegation of loss, and of the causal connection between that loss and the admitted breach of the Contract of Retainer and breach of the duty of care, are unfortunately vague and lacking in precision. That lack of precision gave rise to considerable uncertainty at the trial. That uncertainty was contributed to by the form of the amendments referred to above.

The Evidence in the District Court

1. The Client relied on two affidavits, one sworn by him on 18 August 2014 (the first affidavit) and the other one sworn by him on 29 April 2015 (the second affidavit). He also relied on an affidavit sworn by Adam on 5 May 2015 (Adam's affidavit). There were also documents produced on subpoena by the Bank. The amendments to the statement of claim were made on the basis of material contained in the second affidavit and in Adam's affidavit.
2. In the first affidavit, the Client began by describing his level of proficiency in the English language. He said that, although he had lived in Australia for about 35 years, Arabic was still his preferred language (having been born and grown up in Egypt). He said that he could speak some English, although he had never been formally taught it. He said that he could only read a limited number of simple English words, and could not read or understand complex documents written in English.
3. The Client said that, in November or December 2007, he had a conversation with Adam regarding a loan that he and Ms Nasrallah were seeking from the Bank. The Client said that Adam had told him that he and Ms Nasrallah were trying to get a loan from the Bank for $460,000 to start up a business and they needed someone to guarantee the loan. He said that Adam asked him whether he could guarantee the loan. The Client said in his affidavit that he wanted to help his son with his new business venture, but did not want to risk any more than the Taxi Plate, which he estimated had a value at that time of approximately $350,000. In paragraph 16 of the first affidavit, the Client said that he told Adam words to the effect of: I'll guarantee the loan, but I'm only prepared to guarantee it up to the value of [the Taxi Plate]. I will give security over [the Taxi Plate] and that's all. I don't want to risk any more than the value of [the Taxi Plate].
4. The Client said in the first affidavit that Adam did not ask him to do anything else about the Loan or the Guarantee until about early April 2008. He said that in early April 2008, he received documents described as follows:

• "Guarantee and Indemnity";
• "Security Instrument - Security Interest in Goods"; and
• "Guarantor Acknowledgement of Documents Received". The Client said that he did not remember whether Adam handed the documents to him or whether he received them in the mail from the Bank. He said that when he received the documents, they were unsigned. He said he could not read the documents beyond recognising his own name, the name of the Customer and Ms Nasrallah's name.

1. The Client said in the first affidavit that he had a discussion with Adam on or about the day that he received the documents. Adam told him that he should see a solicitor who could explain the documents to him. The Client said that he had previously retained the Solicitor to perform conveyancing work for him and he thought that he would be a suitable choice to explain the documents to him. He said that, on 7 April 2008, he went to the Solicitor's offices with Adam and Ms Nasrallah, not having made any prior appointment. When they walked through the front door of the Solicitor's offices, the Solicitor was in the reception area. The Client told the Solicitor that he had a guarantee document from a bank and asked whether the Solicitor had time to go through it with him. They went into a room located off the Solicitor's reception area and sat down around a small table.
2. The Client said that he gave the documents to the Solicitor, who flicked through them quickly. Without saying anything else, the Solicitor began pointing to spaces on some of the pages of the documents and told the Client that all he needed to do was to sign those pages. The Client said that he signed in the places where the Solicitor pointed and also watched as Ms Nasrallah signed the documents where the Solicitor pointed. He said that the Solicitor also signed the documents and stamped them in several places.
3. The Client said that the Solicitor appeared to be in a hurry, as he quickly handed the documents back to him as soon as he had signed them. He said that the Solicitor did not ask him anything about the documents or the loan that was being taken by the Customer. He said that, as he was leaving the room, he asked the Solicitor whether that was all and whether there was anything else he needed to know or do. The Solicitor said "No, that's it" and that he should just send the documents to the Bank.
4. The parties to the Guarantee were the Bank, on the one hand, and the Client and Ms Nasrallah, as guarantors, on the other. Their signatures were witnessed by the Solicitor and a stamp of the Solicitor's name and address appears under his signature. The liability of the guarantors was limited to $460,000 plus interest and costs. Part C of the Guarantee dealt with "Securities". It provided that, to cover the liability of the guarantors under the Guarantee, the Bank could "resort to the Securities" and "keep the Securities" to secure any part of the indemnity of the guarantors and any amount owing under the Guarantee. The term "Securities" was defined as "all security" that the Bank held from the guarantors, "now or at any time in the future", over any of the property or assets of the guarantors.
5. The "Security Instrument" described the Taxi Plate as the "[g]oods which are to be secured". It did not contain any assurance provisions. However, it incorporated the terms of a registered dealing which was not in evidence. It is reasonable to assume that the dealing contains relevant assuring or charging provisions that would be applicable to a security over an asset such as the Taxi Plate.

Evidentiary Rulings at the Trial

1. At the trial, after opening the Client's case, counsel for the Client sought to read the first affidavit, the second affidavit and Adam's affidavit. Counsel for the Solicitor then said that, in the light of the admissions made in the defence to the amended statement of claim, the only issue in dispute was causation and therefore he objected to all of the affidavit evidence, save for paragraphs 14, 15 and 44 of the first affidavit. Those paragraphs were in the following terms: 14. I wanted to help my son with his new business venture, but I did not want to risk any more than my Taxi Plate. 15. At about that time (November or December 2007), I estimated that the value of the Taxi Plate was approximately $350,000. […] 44. Had [the Solicitor] explained to me that my liability under the Guarantee Documents extended beyond the value of my Taxi Plate and, to the full value of the amount advanced by the Bank to [the Customer], plus interest and costs, I would not have signed the Guarantee Documents. Instead, I would have told [the Solicitor] to amend the Guarantee Documents to limit the amount of my guarantee to the value of my Taxi Plate.
2. Counsel for the Client responded that all three affidavits were relevant to the question of contributory negligence raised in the defence to the amended statement of claim. After hearing argument, the primary judge indicated that he proposed to allow the affidavits. Counsel for the Solicitor then said that, in the light of that ruling, the Solicitor no longer pressed his contributory negligence allegation and wished to defend the matter only on the basis of causation. Notwithstanding that concession, his Honour admitted the whole of the three affidavits for reasons that he then gave.
3. In doing so, the primary judge observed that the material in the second affidavit was relevant to "the second leg pleaded in para 5 of the amended statement of claim". His Honour observed that, at the outset, the Client's case was that, if he were "to go guarantor", it would only be to the limit of the value of the Taxi Plate. His Honour observed that something occurred to cause the Client to realise that there were some errors in the first affidavit. His Honour said that when, on reflection, the Client thought about when the Customer's business was established, he recalled other material that provided the basis for the second of the alternatives pleaded in paragraph 5 of the amended statement of claim, being that his liability would be limited to $230,000. Thus, his Honour said, at one point the Client said that he understood that his limit of liability under the Guarantee would be about $350,000 and at another point he said that it was about $230,000.
4. The primary judge said that it was not clear how those two propositions could stand consistently together and that it may be that only one of them could stand. His Honour said that the true position might be that which was originally stated, namely, that the limit would be about $350,000. On the other hand, his Honour said, the true position might be that the limit was to be $230,000. His Honour said that, at that stage, he could not possibly know which it was and that the Solicitor could not, by his pleading, tell the Court that it could only embark "on one of those processes". Accordingly, his Honour concluded that all of the affidavit evidence was admissible. That ruling was partially reversed in the primary judge's final reasons for judgment. This matter shall be dealt with below.

The Reasons for Judgment of the Primary Judge

1. Towards the beginning of his final reasons for judgment in favour of the Client, the primary judge referred to paragraph 44 of the first affidavit and paragraph 5 of the second affidavit, in which the Client deposed to what he would have done had the Solicitor advised him that his liability under the Guarantee was not limited. His Honour observed that, in the course of submissions, an issue arose as to whether that evidence was admissible under s 5D(3) of the Civil Liability Act 2002 (NSW) (the Civil Liability Act).
2. Section 5D(1) relevantly provides that a determination that negligence caused particular harm comprises the following elements: 1. that the negligence was a necessary condition of the occurrence of the harm ("factual causation"), and 2. that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused ("scope of liability"). Under s 5D(3), if it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent: 1. the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and 2. any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. 3. [Emphasis added] The primary judge considered that the evidence in paragraphs 44 and 5 was not against the interest of the Client. His Honour therefore concluded that the material in those paragraphs was not admissible, thereby reversing the ruling he had given at the trial in relation to those paragraphs.
3. The primary judge then observed that, at one point, the Client appeared to be saying that he was prepared to sign a guarantee limited to the value of the Taxi Plate, being $350,000, but that at another point he appeared to be saying that he was only prepared to sign a guarantee limited to an amount of $230,000. His Honour considered that the explanation for that apparent conflict lay in the fact that the Client knew a cash security of $230,000 was to be released and he was prepared to cover that by putting up the Taxi Plate as security. His Honour was satisfied that that was the Client's "intention and understanding", although, his Honour said, "it was not expressed well or at all" in the first affidavit. His Honour considered that the explanation for not expressing the intention "well or at all" was that the Client was considerably unsophisticated and handicapped in his understanding of English and that the second affidavit explained apparent errors or oversights in the first affidavit. His Honour said that the Court should be reluctant to reject sworn affidavit material and prefer other material more favourable to the Client and that the view he had taken should be seen as rejecting the last sentence of paragraph 44 of the Client's first affidavit. However, his Honour said, he was really "putting that evidence in its context".
4. In the course of cross-examination, counsel for the Solicitor endeavoured to put to the Client that the assertions made in paragraph 5 of the second affidavit were inconsistent with the evidence given in paragraph 16 of the first affidavit, as confirmed by paragraph 3 of the second affidavit. That endeavour prompted considerable non-responsive and, to some extent, unintelligible responses from the Client. For example, the following exchanges occurred in cross-examination: Q. Paragraph 16 is your evidence? A. I did answer is not like that. The words I guarantee will be - the words I guarantee for taxi plate for 230. Since the guarantee, this what I go. I go the taxi plate guarantee, yes. This why I go the taxi plate guarantee, this why I am understand. Q. You would, it is right, isn't it, that you were prepared, as you have just told the Court, to put up your taxi plates as security? A. Yes I put my taxi plate guarantee, yeah. Q. You were prepared to guarantee only to the value of your taxi plates? A. Is not - is not what I say like that, what I meant like that. Was my understands, my language is - I am guarantee for 230, that is all. That what might be alleged, guarantee for 230. […] Q. Mr Elgammal, your evidence in your first affidavit was that you would have instructed Mr Lee to amend the guarantee so as to be limited to the value of the taxi plates. The evidence in your second affidavit is, and I will read to be precise, "If Mr Lee had told me that the guarantee was not limited to $230,000, then I would not have signed the guarantee"? A. [interpreter] He said Mr Lee had told him nothing. Q. I accept that. My question is this. I put to you the proposition that the two pieces of evidence are inconsistent? A. How? It is what I mean, it is why I understand, it is why I am guarantee for. I am guarantee for 230, this is why I come in. I put my taxi plate for 230 be guarantee because the most of the value of the guarantee and most of the value over what -the money what I did, this is what I - or this is why he say, it is the taxi plate was in his name, the value of the taxi plate was 350, and I am guarantee for 230. This is what I am signing. If he told me, if Mr Lee tell me, this guarantee over 230, I was not sign at all. That's what I got, I no sign at all, or anyone. The primary judge dealt with those answers as follows: When [the Client's] attention was directed to these parts of the affidavits, he acknowledged that they were there and that he said the words in the conversation that were used in the affidavit. His very firm evidence was that that was not the way it was meant. What was meant, in effect, was that $230,000 was to go to Adam and he would cover that and cover that only by putting his taxi plate up. As indicated, I accept that evidence as truthful.
5. The primary judge considered that the Client's oral evidence aided the position and that there could not be the slightest doubt about that evidence, which his Honour described as "forceful" and which his Honour considered was truthful. His Honour said that the Client's "very firm evidence" was that the way in which he put it in his first affidavit was not the way it was meant and that what was meant, in effect, was that $230,000 was to go to Adam and he would cover that, but only that, by putting up the Taxi Plate.
6. The primary judge accepted that the Client would not have signed the Guarantee if its effect had been properly explained to him. His Honour considered that whether the Client was prepared to commit to a limit of $230,000 or to a limit of the value of the Taxi Plate, he would not have signed the documents presented to him without a limit. His Honour then considered the question of whether the Client would have signed the Guarantee if his liability had been limited to either the value of the Taxi Plate or to $230,000, and was satisfied that the Client would have signed the Guarantee if his liability was limited to $230,000. His Honour made no finding as to whether the Client would have signed the Guarantee if his liability had been limited to the value of the Taxi Plate. Rather, his Honour then said that it would not matter that the Client was prepared to sign a guarantee limiting his liability to $230,000 if he was never to be presented with such an opportunity. That, his Honour said, directed enquiry into the hypothetical question of what the Bank would have done if the Solicitor had explained to the Client the effect of the documents that he signed. His Honour then embarked on consideration of what the Bank might have done.
7. The primary judge said that the starting point was that the Client would not have signed the documents given to him if the Solicitor had explained their effect. Further, his Honour said, the Bank would have done nothing unless it was asked to do something, since it had its existing security and did not need to move from that position. His Honour said that the purpose of the exercise was for the cash security of $230,000 to be released and that that was not going to happen if the Client refused to sign the Guarantee. The next step, his Honour said, would be to determine whether, in the circumstances, Adam wanted to press on for the release of $230,000, as to which, his Honour said, there was no evidence. His Honour observed that, assuming that Adam would have pressed on, it was not known whether he would have done so by trying to have the Bank amend the Guarantee so that the Client's liability was limited to $230,000 or whether he would have sought some other form of security. Again, his Honour observed, there was no evidence about those matters.
8. As is clear from what is said above, in his affidavit, Adam gave evidence on behalf of his father. It would have been very simple for him to give evidence as to whether he would have pressed on with the release of the $230,000 deposit and whether he would have tried to have the Bank amend the documents to limit his father's liability or would have sought alternative security. No effort was made to adduce such evidence from Adam on behalf of the Client. An inference would therefore be available that such evidence would not have assisted the Client's case. [1]
9. The primary judge proceeded on the assumption that Adam would have told the Bank that the Client refused to sign and that it would need to amend the Guarantee to limit his liability to $230,000. The question then, his Honour said, was whether the Bank would have done so. His Honour concluded that that was unlikely. His Honour set out the matters that led him to the view that it was unlikely that the Bank would have amended the Guarantee to limit the Client's liability to $230,000. While his Honour considered that none of those matters was definitive, his Honour considered that, together, they favoured the view that the Bank would not have amended the documents to provide for a limit of liability to $230,000.
10. The first matter relied on by the primary judge was that, of the three forms of security taken by the Bank, the only one of immediate tangible and realisable value was the cash deposit of $230,000. There was evidence that neither the Customer nor Ms Nasrallah had any assets. His Honour considered that it was unlikely that the Bank would have let the certainty of the cash deposit go for "the less tangible security" of the Taxi Plate, since the Bank's position was already established, in that the Loan had been made and the Bank had its security. His Honour considered that there was no reason for the Bank to change its position by giving up a valuable security and that it was unlikely that the Bank would have done so in exchange for security that did not have the same certainty and benefits as the one it already had.
11. The second matter considered by the primary judge was that, at the time when the change to the security was made, the Customer owed the Bank almost the full amount of the Loan, being $453,793.72. His Honour considered that, with that amount owing, it was not likely that the Bank would have given up a watertight security that was immediately realisable for one without those qualities, which secured only the same amount. In the preparation of the documents to vary the arrangements, the Bank sought to replace the secure and safe $230,000 with a guarantee for the full amount of the Loan.
12. Those first two matters relied on by the primary judge appear to amount to the same thing. That is to say, the Bank would not give up security over a cash deposit of $230,000 in exchange for a guarantee limited to $230,000, albeit secured over the Taxi Plate having a value of $350,000. His Honour did not consider the possibility that the Bank may have given up security over an asset worth $230,000 in exchange for an asset valued at $350,000.
13. The third matter to which the primary judge referred is that there was nothing in any of the documents produced under subpoena by the Bank that gave any indication that the Bank would have been prepared to limit the Client's liability to $230,000. However, his Honour acknowledged that the Bank was not asked to do so, but considered that that did not negate altogether the fact that such an intention was not to be found in the documents.
14. The third matter has no weight at all. It would be curious to find an indication, in the Bank's documents, of a preparedness or willingness to limit liability if the Bank was never asked to do so. Indeed, the fact that the Bank was not asked whether it would limit the liability under the Guarantee is of telling significance. Adam did not say in his affidavit that he asked the Bank to limit his father's liability to $230,000. Rather, he said that he asked the Bank to release the cash deposit if his father agreed to provide security over the Taxi Plate. The Bank was apparently prepared to agree to that variation. The real question is whether the Bank would have agreed to limit the liability of the Client to the proceeds of enforcement of any security against the Taxi Plate.
15. The primary judge referred to the contention advanced on behalf of the Solicitor that an inference should not be drawn that the Bank would not have agreed to limit the liability of the Client. The Solicitor submitted that the Client had the onus and should have called evidence as to banking practice and as to the saleability of the Taxi Plate. His Honour considered that evidence as to both of those matters may have been marginal in its weight and would have added unnecessarily to the cost and time of the trial.
16. The conclusion of the primary judge was that the Client would not have signed the Guarantee had it not been for the negligence of the Solicitor. His Honour did not identify that negligence, although the defence admitted that the Solicitor's failure to give advice as to the effect of the Guarantee constituted a breach of the Contract of Retainer and breach of an unspecified duty of care. His Honour considered that it was not likely that the Client would have been provided with any other document with a lesser extent of liability and that the Solicitor's negligence was therefore a necessary condition of the occurrence of the harm suffered by him. That is to say, his Honour considered that the negligence exposed the Client to a liability to which he would not otherwise have been exposed. Accordingly, his Honour concluded that the harm caused by the Solicitor's negligence was the full extent of the Client's liability to the Bank and directed judgment for the Client against the Solicitor for the amount of the judgment by the Bank against the Client.

The Appeal

1. The Solicitor complains in his amended notice of appeal that, in his reasons, the primary judge erred in the following respects:

• First (grounds 1 to 3), in failing to find, as an admitted fact, the Client's primary pleaded allegation that he had agreed to act as guarantor to the extent of the value of the Taxi Plate and in finding, inconsistently with the primary pleaded case, that the Client would have refused to provide a guarantee unless it was limited to an amount of $230,000;
• Secondly (ground 4), in rejecting paragraph 44 of the first affidavit, which was read without objection;
• Thirdly (grounds 5 to 7), in having regard to oral evidence given by the Client in cross-examination as a consequence of admitting paragraph 5 of the first affidavit, which his Honour subsequently rejected (without prior notice to the parties);
• Fourthly (ground 7A), in admitting and relying on the oral evidence of the Client to the extent that it consisted of self-serving statements by him that were not against his interest, as to what he would have done if the Solicitor had not been negligent;
• Fifthly (grounds 8 to 11), in concluding that the Client established, on the balance of probabilities, that the Bank would not have accepted a guarantee limited to $350,000; and
• Finally, (ground 12), in finding that the Client had suffered any loss and damage by reason of the Solicitor's conduct.

1. Those groups of grounds overlap to some extent. They amount to two distinct complaints. The first is that the primary judge erred in failing to find that the Client would have signed the Guarantee if his liability under it was limited to the sum of $350,000 or the value of the Taxi Licence. The second is that his Honour erred in not concluding that the Client had failed to establish that the Bank would not have released the term deposit if it had been provided with the Guarantee with the Client's liability so limited.

Grounds 1 to 7A

1. Clearly enough, the pleading of alternative cases by the Client in paragraphs 5, 9 and 15 of the amended statement of claim was embarrassing, in so far as the Client asserted that he had agreed to give a guarantee limited to the value of the Taxi Plate or, in the alternative, to the value of $230,000. The two assertions cannot stand together. That is to say, either he agreed to limit his liability to the value of the Taxi Plate or he agreed to limit his liability to the sum of $230,000. While it is permissible for a pleading to allege alternative factual cases, it is not permissible where the party pleading knows which of the alternative factual cases is correct and which is not correct. [2]
2. A situation could arise where a party pleads communications of which he is aware, in circumstances where there is a dispute as to the effect of the communications. In such a case, it would be permissible for the party to plead the different effects in the alternative. However, that is not the present case. There is no factual dispute as to the communications. The only dispute is as to what was in the subjective mind of the Client when he signed the Guarantee, and what he would have done, had he been properly advised as to the effect of the documents that he signed. It would have been one thing to amend the statement of claim to allege a limit of $230,000 in lieu of a limit of $350,000. However, it was impermissible to allege those as alternatives, when the Client must have known what was in his own mind.
3. In any event, the Solicitor did not object to the filing of the amended statement of claim. No complaint was made that the amendments rendered paragraphs 5, 9 and 15 embarrassing. It is therefore not open to the Solicitor to complain on appeal that the amendments ought not to have been allowed.
4. The essence of the Solicitor's complaint is that the primary judge erred in concluding that the Client did not agree to give a guarantee limited to the value of the Taxi Plate, but, rather, only agreed to give a guarantee if it was limited to the sum of $230,000. Thus, it would be correct to consider that the primary judge erred in his approach to the fact-finding process in that regard. His Honour rejected paragraph 5 of the second affidavit, but also rejected paragraph 44 of the first affidavit. Paragraph 44 of the first affidavit was admissible, notwithstanding s 5D of the Civil Liability Act, since it was an admission against interest. That is to say, the Client said in paragraph 44 that he would have asked the Solicitor to amend the Guarantee to limit the amount of his liability to the value of the Taxi Plate. His Honour did not deal with that evidence, having rejected it in his reasons.
5. While the primary judge had the advantage of seeing the Client in the witness box, the Client's evidence is, to a considerable extent, incomprehensible. It was given through an interpreter, although in a number of instances (including almost all of those extracted above at [37]), the Client answered the question in English himself. His Honour referred to the fact that the Client has an "extremely faltering and significantly imperfect" understanding of English, both written and spoken, and went on to conclude that the explanation for the "apparent inconsistency" lay in the fact that the Client knew a cash security of $230,000 was to be released and he was prepared to cover that by putting up his Taxi Plate as security and that while it "was not expressed well or at all" in the first affidavit, "that was his intention and understanding". His Honour said that the explanation for the Client's failure to express himself well was that the Client was "considerably unsophisticated and handicapped in his understanding of English" and that the first affidavit "was a document of some length and complexity".
6. It is difficult to see what was particularly long or complex about the first affidavit, and the second affidavit was only six paragraphs. In that regard, it is relevant that the first affidavit contains a certificate by a solicitor to the following effect: 1. It appears to me that the deponent is unable to read written English. 2. This affidavit was read to the deponent in my presence by an Egyptian language translator arranged by me. 3. It appeared to me that the deponent understood the affidavit as read to him. 4. The deponent subscribed the affidavit his signature or mark, as set out above, in my presence. A similar certificate is endorsed on the second affidavit.
7. We consider that this Court is in just as good a position as his Honour to make a finding as to whether, had the Solicitor advised the Client that the Guarantee was limited to $460,000, rather than $350,000 or the value of the Taxi Plate, and the Guarantee had been amended to reflect a limit of $350,000, the Client would have signed the Guarantee. It is open to this Court to re-examine the factual finding made by his Honour as to what would have happened had the Solicitor given the Client proper advice.
8. The form of the pleading is significant in relation to the communications that actually took place between the Client and Adam as to the basis upon which the Client was prepared to give a guarantee to the Bank. As has been indicated, in the statement of claim as originally filed, which was verified by affidavit of the Client, the Client asserted that he agreed to act as guarantor for the Loan to the extent that his liability was limited only to the value of the Taxi Plate, being $350,000. He also swore that at no time did the Solicitor advise him that his liabilities and obligations under the Guarantee extended beyond the value of the Taxi Plate.
9. It was clearly inconsistent for the Client to say, on the one hand, that he would have told the Solicitor to amend the Guarantee to limit the amount of the Guarantee to the value of the Taxi Plate, and to say, on the other hand, that if the Solicitor had told him that the Guarantee was not limited to $230,000, he would not have signed it. The primary judge concluded that, while paragraph 44 of the first affidavit and paragraph 5 of the second affidavit were inconsistent, if those paragraphs were to be ignored, there was no inconsistency. His Honour said that he was satisfied, on the whole of the evidence, that there was no inconsistency.
10. The Solicitor accepted that he was guilty of breach of the Contract of Retainer and of a duty of care that he owed to the Client, although the content and scope of any such duty was never specified by either party. It is somewhat significant that neither the Client nor Adam suggested that the Solicitor was asked to give any advice concerning the extent of the obligation that the Client was undertaking by signing the Guarantee. In particular, neither said that he told the Solicitor that it was the Client's understanding that his liability would be limited in some way. It is indeed curious, in the light of the statements made by the Client in paragraph 44 of the first affidavit and paragraph 5 of the second affidavit, that he did not mention to the Solicitor that he understood that his liability under the Guarantee was to be limited. That is particularly so given that the Client had apparently expressly foreshadowed a limitation in his conversation with Adam.
11. We have already reproduced the substance of the first affidavit and the second affidavit above (at [13]-[24]). Significantly, in paragraph 3 of the second affidavit, the Client said that he responded to Adam's request in words to the same effect as outlined in paragraph 16 of the first affidavit. That is to say, he repeated the allegation that he said to Adam that he would guarantee the Loan, but was only prepared to guarantee it up to the value of the Taxi Plate. He made no mention of any limitation of his liability to the sum of $230,000.
12. In Adam's affidavit, the version of the discussion in April 2008 was as reproduced in [26] above. Thus, there was no indication that, either in the discussion between the Client and Adam or in the discussion between Adam and the Bank, was anything said to indicate that the liability of the Client was to be limited to the sum of $230,000. The first suggestion of a limit of $230,000 came with the second affidavit and Adam's affidavit. While paragraph 5 of the second affidavit and paragraph 22 of Adam's affidavit (extracted above at [29]) refer to an understanding or an assumption that the extent of the Client's liability would be limited to $230,000, neither the Client nor Adam suggested that he expressed that understanding to the other. Each simply gave evidence of alleged thought processes. There is nothing whatsoever in the communications about which they both gave evidence that would justify a conclusion that either of them believed or assumed that the liability of the Client would be limited to $230,000.
13. The Solicitor complains that the course of the trial and inconsistent rulings by the primary judge led his Honour into error in the fact-finding process. Thus, the Solicitor says, the primary judge erred in finding, if his Honour did in fact find, that the Client's intention and understanding was that he was prepared to sign a guarantee only if his liability was limited to an amount of $230,000. While that appears to be the effect of the finding made by his Honour, the reasoning is not easy to follow. His Honour referred to the submission advanced on behalf of the Solicitor that the Client had given inconsistent evidence, but then concluded that, if evidence was rejected under s 5D(3) of the Civil Liability Act, as indicated above, there would be no inconsistency. He said that he was satisfied, on the whole of the evidence, that there was no inconsistency.
14. The primary judge appears to have found (at [17]) that what the Client meant to say was that, under the proposed arrangement, $230,000 was to go to Adam and he would cover that amount, and cover that amount only, by putting up the Taxi Plate as security. His Honour accepted that evidence as truthful. On the other hand, his Honour subsequently said (at [18]) that it did not matter whether the Client was prepared to commit to a limit of $230,000 or to the limit of the value of the Taxi Plate. His Honour then said that there was an issue as to whether the Client would have signed the guarantee if his liability was limited to either the value of the Taxi Plate or to $230,000, and that the real question was whether he was prepared to accept the limit of his liability being $230,000 or the value of the Taxi Plate (at [19]).
15. As noted at paragraph [36] above, the primary judge observed that the Court should be reluctant to reject the sworn affidavit material and prefer other material more favourable to the Client. That, however, is precisely what his Honour appears to have done, by accepting evidence given by the Client in cross-examination. His Honour said that the second affidavit explained "some apparent errors or oversights" in the first affidavit. Significantly, however, the second affidavit confirmed the response given by the Client to Adam, as set out in paragraph 16 of the first affidavit, something that his Honour appears to have overlooked. His Honour went on to say as follows (at [17]): The view I have taken may be seen as rejecting the last sentence of paragraph 44 (and see also paragraph 16 of the second affidavit), but it is really putting that evidence in its context. Aiding that was [the Client's] oral evidence. There cannot be the slightest doubt about that evidence. It was forceful … I thought it was truthful.
16. There was no paragraph 16 in the second affidavit and the primary judge may have been intending to refer to the first affidavit. In circumstances where the Client, in response to his own counsel when he began his oral evidence, swore that the contents of the two affidavits were true and correct, an inference should be drawn that, at that stage, no instructions had been given by the Client to his counsel to the effect that any part of the first affidavit was mistaken, except to the extent stated in the second affidavit. His Honour said that the evidence in paragraph 44 of the first affidavit was not against interest and was therefore not admissible. However, it was clearly against interest, in so far as the Client said that he would have told the Solicitor to amend the guarantee documents to limit the amount of his guarantee to the value of the Taxi Plate.
17. No explanation was proffered on behalf of the Client as to what prompted the amendment to plead the "alternative" case. The only hint of a reason is contained in paragraph 5 of the second affidavit, where the Client said he assumed that the extent of any personal guarantee he would be providing would be limited to $230,000. No attempt was made to adduce evidence to the effect that the Client was mistaken in what he said in the first affidavit, except as to the date of his conversation with Adam and the timing of the Loan.
18. The only basis upon which the primary judge could have reached the conclusion that the Client would not have signed the Guarantee unless it was limited to $230,000 is the oral evidence as to what he would have done if the Solicitor had advised him properly as to the effect of the Guarantee. That evidence, given by him in cross-examination, could only be relevant to his thought processes and state of mind. It did not purport to be evidence of any communication that he had with Adam concerning the basis upon which he would provide a guarantee. To that extent, it does not detract at all from paragraph 16 of the first affidavit, as confirmed by paragraph 3 of the second affidavit.
19. It was evidence given after the event, which was not against interest and was therefore inadmissible under s 5D. Further, much of that evidence was not responsive to the questions put to the Client. While no objection was taken at the trial to the non-responsive answers, little weight should be given to evidence of that nature, particularly in circumstances where there would have been no cross-examination if his Honour had rejected paragraph 5 of the second affidavit at the trial.
20. The Guarantee was in fact limited to the sum of $460,000. It is certainly fair to conclude that, had the Client been advised that that was the effect of the Guarantee, he would not have signed it. That, however, is not the question. The relevant question is whether, had the Guarantee been limited to $350,000, namely, the value of the Taxi Plate, the Client would have signed it. On the basis of the communications that he had with Adam, there is every reason to conclude that he would have done so.
21. The submission on behalf of the Client, that the unchallenged evidence was that the request for the provision of the Guarantee was made in terms that conveyed the suggestion that the guarantee would be limited to $230,000, is simply not made out. The Client's evidence (as recounted in the second affidavit) was that Adam asked him: "Would you be prepared to give the Bank security over the value of [the Taxi Plate] and guarantee the loan in exchange for the release of the $230,000 deposit?" Adam's affidavit asserted that he wanted to use the $230,000 on deposit and that he asked his father to give the Bank security over the Taxi Plate in lieu of the deposit. There was no suggestion in Adam's affidavit that the liability of his father would be limited to $230,000. The only sensible understanding of the evidence of both the Client and Adam is that the Client was to substitute the Taxi Plate for the deposit of $230,000. Even if the Client was to have no liability beyond the proceeds of the Taxi Plate, the full value of the Taxi Plate of $350,000 would be available to the Bank.
22. We are persuaded that it is more likely than not that, if the Solicitor had advised the Client that the Guarantee was limited to $460,000, and the Guarantee had been amended to reflect a limit of $350,000, or the value of the Taxi Plate (whether or not the Bank would have accepted that limit, had it been asked), then the Client would have signed the Guarantee. The primary judge erred in failing to make that finding.

Grounds 8 to 12

1. The Client contends that the primary judge was correct to conclude that it was not likely that the Bank would have given up a "watertight security", which was immediately realisable, in exchange for a personal guarantee that did not have those qualities and secured only the sum of $230,000. That may be so. However, it is not the relevant question, which is whether the Bank would have accepted security over an asset worth $350,000 in substitution for security over an asset, albeit cash, worth $230,000.
2. One of the bases upon which the primary judge found that it was unlikely that the Bank would have let go of the deposit of $230,000 was that the Bank would not have the same certainty in having a security over the Taxi Plate, rather than in having security over the deposit. However, in circumstances where, on the uncontested evidence, the Taxi Plate was worth $350,000, it would be beneficial to the Bank to have the Taxi Plate as a replacement for the deposit of $230,000. His Honour simply did not make any findings so far as the Bank was concerned on the assumption that the Client would have been prepared to accept liability under the Guarantee up to the value of the Taxi Plate.
3. That is to say, the primary judge did not address the question of whether, had the Bank been asked to accept a guarantee with the Client's liability limited to the value of the Taxi Plate, the Bank would have been prepared to release its security in respect of the deposit of $230,000. His Honour only considered the question of whether or not it was likely that the Bank would have released the deposit in exchange for a guarantee limited to the sum of $230,000. As has been said, it would be fair to conclude that it is unlikely that the Bank would have released the cash deposit of $230,000 in exchange for a guarantee limited to $230,000, albeit supported by a security over the Taxi Plate. The real question, however, is whether the Bank would have released the deposit in exchange for a guarantee from the Client limited to the value of the Taxi Plate. The Client asserted in the statement of claim that the Taxi Plate had a value of $350,000 and there was no evidence to suggest that its value was anything other than $350,000.
4. There may well be good commercial reasons why the Bank would have accepted a proposal whereby, in lieu of security in respect of a cash deposit of $230,000, it was to be given security over an asset worth $350,000, albeit one that was not as liquid as the cash deposit. Under such an arrangement, the Bank would also have had the benefit of a guarantee from the Client, albeit limited to the value of the Taxi Plate. Even if the security over the Taxi Plate was without recourse to the Client personally, the Bank may well have regarded itself as being in a more favourable position with a security over an asset having a value of $350,000 as compared with security over an asset having a value of $230,000, albeit that the latter may have been more easily realisable. The primary judge did not consider that question.
5. It was for the Client, as plaintiff, to establish his loss. The Client's case was that, had the Solicitor advised him of the fact that the Guarantee limited his liability to $460,000, rather than the value of the Taxi Plate, he would not have signed the Guarantee. Nevertheless, it is clear that Adam had proposed to the Bank the release of the deposit of $230,000 in exchange for security over the Taxi Plate. The evidence indicates that the Bank did not reject that proposal. Rather, according to Adam, the Bank's representative said that it would send out the forms that needed to be completed for the Bank to consider the request. Apparently that happened, although no such documents were in evidence.
6. The Client subpoenaed the Bank to produce:

• all internal documents of the Bank relating to the Loan, including documents relating to approval of the Loan, any variation of the Loan, and documents relating to the Guarantee; and
• all documents comprising the Loan. The Bank did not produce anything in answer to that subpoena concerning internal consideration by the Bank of the request from Adam for the substitution of one security for another. There was certainly nothing in the material produced to indicate that the Bank would not have approved the release of the deposit of $230,000 in exchange for security over the Taxi Plate valued at $350,000. As has been indicated, from a commercial point of view, there is good reason why the Bank may have regarded that as an improvement in its position, in circumstances where Adam asserted that the Customer had no assets and that Ms Nasrallah had no assets. There was nothing in the material produced by the Bank to indicate that the Bank gave any consideration to the asset position of the Customer, Ms Nasrallah or the Client. Curiously, no security appears to have been sought from or provided by Adam.

1. It is not persuasive to suggest that it is more likely than not that the Bank would have rejected a proposal to limit the liability of the Client to the value of the Taxi Plate. It is more likely than not that the Bank would have accepted a limit of $350,000 on the Client's liability under the Guarantee. The amount of the liability of the Client to the Bank that the Client was called on to pay to the Bank was the Guaranteed Amount, which was less than the value of the Taxi Plate. In those circumstances, the primary judge erred in concluding that the Client suffered any loss or damage as a consequence of the failure of the Solicitor to advise the Client properly as to the effect of the Guarantee.

Conclusion

1. The appeal should be allowed. The Court should make the following orders: 1. Appeal be allowed. 2. Orders of the District Court on 14 May 2015 be set aside, and, in lieu thereof, there be judgment for the appellant in the District Court. 3. The plaintiff pay the defendant's costs in the District Court. 4. The respondent pay the appellant's costs of the appeal. 5. The respondent have a certificate under the Suitors' Fund Act 1951 (NSW) if otherwise entitled.

Endnotes

1. See Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389.
2. See, eg, Adamson v Ede [2009] NSWCA 403 at [30]-[31].

Amendments 13 April 2016 - Typographical and reference amendments DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 April 2016