Secured Lending 1 Pty Ltd v Mahmassani

Meeting on 21 September 2018

1. The cross-claimants assert that a meeting was arranged at the solicitor's office in Egerton Street, Silverwater on 21 September 2018. The solicitor's offices were in the same building occupied by the broker. Present at this meeting were the broker, the solicitor, the investors, the cross-claimants and Bilal. The cross-claimants had never met either the broker or the solicitor, or spoken to them before that time.
2. The cross-claimants say that they were told to bring the certificate of title to the property with them to the meeting, and they did so.
3. The cross-claimants' account of the meeting is as follows. One of the investors addressed the solicitor and the broker and said words to the effect: Mr Mahmassani is here for a loan. Mr Zreika then addressed the cross-claimants and said: This is the broker, we are going to get the money from him. We are going to help you. If we get the money, we will work with the money and give the money back. We will pay the interest, and give you the certificate of title back.
4. Mr Mahmassani then said to the solicitor: Who are you with? With us or with them? The solicitor gestured to the cross-claimants and Bilal, and then to the investors, and said "For both of you".
5. One of the investors said words to the effect: We will use your house and borrow $750,000 for a period of three months. We'll pay the interest on the loan. All we need from you is the certificate of title and three months so that we can invest the money and you won't lose the house.
6. A contract of sale was put in front of Bilal. Mrs Mahmassani said: What happens if we can't repay the money? At that point, the broker spoke quickly to the investors, and Mr Zreika then said words to the effect: We're going to pay back the money, work the money and pay it back and if that fails your son will buy the property. They then pushed the contract of sale towards Bilal.
7. Mrs Mahmassani said that she felt a lot of pressure and she was afraid they would kill Bilal. She said she felt forced and didn't feel like she had a choice. She said she believed that they (the investors) would pay the money back.
8. The broker then asked for the certificate of title and Mr Mahmassani gave it to him.
9. The solicitor then said to Mr Mahmassani, "Read the documents and sign here". Mr Mahmassani signed the documents. He then said to Mrs Mahmassani, "Sign here" and she signed them. She said that she did not read English. Her husband did read English and she said she trusted him 100%. She said that he did not read the documents on that day because they were not given enough time to do so. She said the meeting took only about half an hour. Mr Mahmassani said he was asked to sign one document, and he felt pressured to sign it.
10. The solicitor's account of the meeting was somewhat different.
11. The solicitor said that when he returned from Friday prayers at about 2:00pm he saw people sitting in the reception area of his office. At the time, he did not know who they were. He went to his office to resume his work. About 30 minutes later, the broker came into his office and said words to the effect: I have the clients outside. Can you please come in to see them to discuss the sale of their property? The solicitor was aware that he was to see clients who, he understood, wished to sell their property. The detail of the solicitor's prior involvement with the broker will be set out later.
12. The solicitor went to the boardroom. He said that the two persons who were to become his clients were present with their son Bilal, the broker and two other men who he came to know were Ghazi Zreika and Khaled El Chami.
13. The solicitor said that the following conversation ensued: Solicitor: Salam Wa Lekum [a religious greeting]. The Broker: Hajj [a commonly used respectful term to address an elderly man in Arabic] this is Ammar Jamal-Eddine who is a solicitor with an office here. I have spoken to him and he is happy to act for you. Mr Mahmassani: [Pointing to his son] This is my son, and [pointing to the other two men] these are my son's business partners, who are also like my sons. The Broker: Mr and Mrs Mahmassani will be taking out a short-term loan against their property. Their son will purchase the property from his parents. Then I will assist the son to obtain a refinance for the property. The son will use the money from the refinance to pay off his and his partners' debts. Mr and Mrs Mahmassani will continue living in the house. Solicitor: I didn't know anything about that, Kadir. My understanding was that the clients are selling their home to their son. Only the clients can be in the room as I need to be sure that there is no duress and that they understand the transaction they are entering into. I am not comfortable seeing you all together before discussing the nature of the case with the clients.
14. Mr Mahmassani then said that the investors were like his sons, and anything could be said in front of them. The solicitor asked if Mr Mahmassani intended to sell the house to his son and if he would like the solicitor to act for him. Mr Mahmassani replied: Yes. I want to help my son and his partners get out of trouble. We really need the money urgently. We are tired of people coming to our house chasing us for money that my son owes them. Our reputation in the community has been ruined. I can't even go to the mosque.
15. The solicitor then said he would get a copy of the contract for them to look at, and asked if he wanted to do that with everyone in the room. Mr Mahmassani said he did.
16. Bilal then asked if contracts could be exchanged that day because the money was needed urgently. The solicitor said that he would only exchange contracts if Bilal sought independent legal advice. He said Bilal would also need to provide a 10% bank cheque and a s 66W certificate. He said he was unable to act for both Bilal and his parents because there was a conflict of interest. The broker indicated that he could get Safa to act for Bilal. (Safa Harris was another solicitor known to the broker.) The broker also said that the cross-claimants did not have a solicitor to act for them, and asked if the solicitor would act. The solicitor asked them if they wanted him to act, to which Mr Mahmassani responded: You look like an honest person. You speak Arabic and are well spoken, so I have no problem with you acting.
17. The solicitor recalled that he took steps to verify the cross-claimants' identity. He said it was his usual practice to provide a copy of the contract to clients for them to read and review while he explained it to them, and he believed he did that on this occasion. He also said it was his usual practice when meeting with Arabic speaking clients to read the contract terms in English and then explain to them in Arabic. He said that he believed he adopted that course on that occasion. He said that based on his discussions with them on that day he formed the belief that both of them spoke and understood spoken English.
18. When he had finished reviewing the contract he told them that he would be happy to act for them if they chose to sell their property. He said that he did not know how it came to be raised, but the broker had a document entitled "Indicative letter of offer" from Secured Lending. He said he did not recall reviewing that letter or discussing its terms with the cross-claimants at the meeting because he had not seen it previously. He told them that he was prepared to be the solicitor nominated at the end of that letter to act for the cross-claimants.
19. The solicitor denied gesturing or saying words to the effect "for both of you" to mean that he was acting for the cross-claimants and the investors. He said he did not hand any document to Mr Mahmassani for signature, and he did not see the CT at the meeting. He recalled that the letter of offer was signed at the meeting.
20. Notwithstanding the difference in the accounts of the meeting, the evidence is clear that only two documents were signed at that meeting. The first was a contract of sale from the cross-claimants to Bilal which was signed only by Bilal. The second was the indicative letter of offer which was signed by the cross-claimants.
21. On 25 September 2018 the investors came to the cross-claimants' home. They drove them to the Commonwealth Bank of Australia at Paramatta. Mr Zreika said, "My cousin works in the bank at Parramatta, so he can help me. We will open a company bank account". Mr Mahmassani remembers that he was asked to show his driver's licence to open the account. While they were at the Bank Mrs Mahmassani said that Mr El Chami said, "I will not touch the money unless Khaled [Mr Mahmassani] is with me".

Meeting on 26 September 2018

1. On 26 September 2018, the investors arrived at the cross-claimants' house and told them they had to go back to the solicitor to sign more documents. They said Bilal was not to accompany them. The investors drove them to the office where they had met the solicitor and the broker on 21 September. Mrs Mahmassani said that the solicitor, the broker and the investors talked, and her husband listened. She said she did not understand when they talked. They asked "Did you bring your passports?" and her husband said they did not.
2. Mr Mahmassani said that at the meeting the solicitor brought out a big bundle of papers. He gave a brief explanation, reading through the papers very fast. Mr Mahmassani recalled that the solicitor said words to the effect that the loan had to be repaid, that it was for three months and that it could be extended for a further three months. He did not recall the solicitor saying that the house could be sold if it was not paid back.
3. He said that he and his wife were handed a number of documents and were told "Read these and sign each page". He said he did not have his reading glasses and did not read the documents properly. Mrs Mahmassani said that the solicitor placed a number of documents in front of her husband and said "Look, you have to sign here and here" and he pointed to open documents. There were no "stickies" on the documents; rather, the documents were open where they had to sign. Her husband signed them, and then the solicitor told her to sign them and pointed to where she had to sign. She did so.
4. Mrs Mahmassani said that the solicitor, the broker and the investors left the room while she and her husband waited in the office for them. When they returned, the solicitor said that they had to come back the next day to bring their passports. She said the meeting took only about 20 to 30 minutes. The investors then drove them home. She recalled the solicitor saying words to the effect, "We will give you the money for three months, then give you another three months to repay it, so six months."
5. The solicitor's account of this meeting was as follows.
6. Late in the morning of 26 September the solicitor said that he received from Summer Lawyers, the plaintiff's solicitor, a letter with a number of loan documents. He said he reviewed the loan documents on his computer and then sent them to the receptionist for printing.
7. He said a meeting had been arranged by the broker at 3:00pm on that day. When he entered the boardroom he saw the cross-claimants and one of the investors - the solicitor now cannot recall which of them was present. The solicitor addressed the cross-claimants and told them that he was only expecting them. He said he was not comfortable with having a third person at the meeting. Mr Mahmassani said that they would prefer that the other man remained in the room, but the solicitor refused and ordered the man out of the room. He left the room.
8. The solicitor said that at the outset of the meeting he verified the cross-claimant's identity by sighting their passports, Medicare cards and some other cards. He said he took a photo of Mr Mahmassani holding his driver's licence and mobility parking scheme and a photo of Mrs Mahmassani holding her photo card and passport. He then said he spent approximately three hours with the cross-claimants reviewing and executing the loan documents. He said he spoke to them in both Arabic and English. He said, contrary to what Mr Mahmassani had said, that Mr Mahmassani was wearing his reading glasses.
9. The solicitor then said words to the effect: The loan term is a short-term loan for three months. If the loan is not repaid within three months, then your house will need to be sold to pay the lender. The total amount of interest on the loan is $45,000.00, and this interest is prepaid and taken out of the total amount of the loan. The borrower is the company you have set up, Menara Traders, and you are both guaranteeing the loan. This means that you are guaranteeing Menara's obligations under the loan and the lender can go after you both personally even though Menara is the borrower. The effect of registering the company means that it is not a consumer loan, which means there are certain protections you don't get if it was a consumer loan. The effect of the authority to Summer Lawyers is that my fees will be paid out of the loan monies.
10. The solicitor then went through the various fees associated with the loan including a rollover fee if they requested to extend the repayment date. He then detailed the interest and the default interest that was charged.
11. The solicitor then said: It is a special condition of the loan that your exit strategy for the loan is the sale of your house and that you agree to enter into a contract for the sale of your house within two months of signing these documents. Do you know how much the property is worth? As I explained, the lender requires you to sign and exchange a contract of sale for the property within two months of signing these documents to pay them back, or they will take it and sell it. You shouldn't sign the loan documents until you exchange contracts on the sale of the property with your son.
12. Mr Mahmassani said: Yes, I know. I'm sure we can get at least $1.2 million for the house. I spoke to an agent before this meeting and a property near ours just sold for $1.2 million. That property is not a duplex site. My property has a larger frontage and is a duplex site. I will get more than that. The Solicitor: If you intend for your son to purchase your house, I think it would be safer for your son to exchange on a contract for sale first to ensure that he can obtain a loan against the property and pay out the private lender before you obtain the loan from the private lender at such high interest rates. Mr Mahmassani: We have two months to find another buyer don't we? Solicitor: Yes. But are you confident you will find another buyer in that time? Mr Mahmassani: Yes.
13. During the discussion Mr Mahmassani raised the fact that the interest rate was very high. The solicitor explained that that was because it was a private loan. Mr Mahmassani said he knew that, because they had taken out a private loan previously with a lower interest rate. Mr Mahmassani suggested that perhaps they could negotiate it. The solicitor said he did not negotiate the rate, and that his job was only to advise them on what they had. He said they would need to speak to the broker or the lender if they wanted to negotiate the rate. He said they did not have to take the finance if they didn't want to pay such high interest.
14. The conversation continued: Mr Mahmassani: No, we need the money urgently. My son has put me in this position. We are reputable family from Beirut. I'm a well-known person. We want to fix this problem. I do not even want to go to the local mosque anymore because of what this issue has done to my reputation in the community. The Solicitor: So, would you like to proceed? Mrs Mahmassani: Do you have any children? The Solicitor: No. Mrs Mahmassani: You wouldn't understand what you will do to help your child.
15. The solicitor then said that the decision was one for them to make. He said he had explained the documents and it was a matter for them if they wanted to proceed or to try to negotiate the terms further. Mr Mahmassani said they wanted to proceed, and that they had received financial advice from an accountant who had advised that the loan and sale wouldn't affect their pension. He asked the solicitor if this was correct. The solicitor said he could not give them financial advice. He said to them: Do you understand what I have explained to you and do you want to proceed with the loan? Each of them said they did. The solicitor then witnessed their signatures on the documents.

Subsequent events

1. The cross-claimants claim that on the following day, 27 September, the investors again came to their house. The cross-claimants say that they followed the investors in their own car to the solicitor's office, with their passports. When they arrived, the solicitor took photographs of them with their passports in the boardroom.
2. The solicitor said that the cross-claimants dropped the CT at his office either on 26 September or on the morning of 27 September. He denied that he asked the cross-claimants to return to his office on 27 September with their passports because they had brought them on 26 September.
3. On 28 September, Mr Mahmassani went with the investors to the CBA at Ermington. He said that when the investors had visited him at his home prior to 21 September, they had said they would just use $100,000 per month and invest it. However, on 28 September they told him to withdraw all the money that had been transferred to the Menara Traders Account. Mr El Chami said words to the effect: We will take the money from the Menara Traders account and put it in my investment account and make some money.
4. Mr Mahmassani said he signed papers, and he believed that the money was deposited into a CBA account of Mr El Chami.
5. Mr Mahmassani said that some time later he went back to the CBA and asked them if there was any money left in the Menara Traders account. He was told that there was no money in that account.
6. It will be necessary to examine this evidence to determine what is most likely to have occurred at the meetings of 21 and 26 September. It is clear from the case brought by the cross-claimants, that the 26 September meeting is the significant one because it was only on that occasion that the cross-claimants committed themselves to the loan and mortgage arrangement.
7. Before examining the surrounding evidence, it is necessary to say something about the broker and his absence from the hearing.

The broker

1. The broker had sworn an affidavit on 5 June 2020 when he was a cross-defendant. The broker was present at the meeting on 21 September 2018 and was asserted by the cross-claimants to have been present on 26 September.
2. An issue arose about whether the broker was in the camp of the solicitor, leading to a conclusion that the failure by the solicitor to call the broker might result in a Jones v Dunkel inference.
3. In RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56, McColl JA (with whom Emmett JA with added reasons and Sackville AJA agreed) said: [75] The rule in Jones v Dunkel is that the "unexplained failure by a party … to call witnesses … may in appropriate circumstances lead to an inference that the uncalled evidence … would not have assisted that party's case": Cross on Evidence ("Cross"), LexisNexis (at [1215]). Any "explanation" such as unavailability or absence of recollection for the failure to call the witness must be established by evidence: West v Government Insurance Office (NSW) [1981] HCA 38; (1981) 148 CLR 62 (at 70) per Murphy J; Rowell v Larter (1986) 6 NSWLR 21 (at 24 - 25) per Young J (as his Honour then was). The "rule cannot be applied to the non-calling of a [non-party] witness unless it would be natural for the party to call the witness, or the party might reasonably be expected to call a witness": Cross (at [1215]); O'Donnell v Reichard (at 729) per Newton and Norris JJ. [76] The circumstances for drawing a Jones v Dunkel inference are found where the uncalled witness is "a person presumably able to put the true complexion on the facts relied on [by a party] as the ground" for any inference favourable to the plaintiff: Jones v Dunkel (at 308) per Kitto J; Australian Securities and Investments Commission (ASIC) v Hellicar [2012] HCA 17; (2012) 247 CLR 345 ("ASIC v Hellicar") (at [168]) per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. [77] The Iannis bore the burden of proof on the issue of whether the loan agreement and mortgage were unjust. Accordingly, in deciding whether they had discharged that burden of proof, it was relevant for the primary judge to have regard to their "ability to adduce evidence relevant to the issue and any failure on [RHG's] part … to adduce available evidence in response": G v H [1994] HCA 48; (1994) 181 CLR 387 at (391 - 392) per Brennan and McHugh JJ. [78] In Payne v Parker [1976] 1 NSWLR 191 (at 201 - 202) Glass JA explained (albeit in a dissenting judgment, but in a passage accepted as correctly stating the relevant principles) when one party rather than the other would be expected to call a missing witness in the following manner: "(6) Whether the [Jones v Dunkel] principle can or should be applied depends upon whether the conditions for its operation exist. These conditions are three in number: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained. (7) The first condition is also described as existing where it would be natural for one party to produce the witness: Wigmore, par. 286, or the witness would be expected to be available to one party rather than the other: O'Donnell v Reichard [1975] VR 916, at p. 921, or where the circumstances excuse one party from calling the witness, but require the other party to call him: ibid. [1975] VR 916, at p. 920, or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him: ibid. [1975] VR 916, at p. 920, Regina v Burdett (1820) 4 Barn & Ald 95; 106 ER 873, or where the witness' knowledge may be regarded as the knowledge of one party rather than the other: Earle v Castlemaine District Community Hospital [1974] VR 722, at p. 733, or where his absence should be regarded as adverse to the case of one party rather than the other: ibid. [1974] VR 722, at p. 734. It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than to his adversary: ibid. [1974] VR 722, at p. 728. If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so: ibid. [1974] VR 722, at p. 728. Evidence capable of satisfying this condition has been held to exist in relation to a party's foreman: Cafe v Australian Portland Cement Pty Ltd (1965) 83 WN (Pt 1) (NSW) 280; his safety officer: Earle v Castlemaine District Community Hospital [1974] VR 722; his accountant: Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348; his treating doctor: O'Donnell v Reichard [1975] VR 916, at p. 921." [79] If those conditions are satisfied, the tribunal of fact may "infer that that person's evidence would not have helped that party's case" and may then use that inference: "(a) in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party, and which relates to a matter with respect to which the person not called as a witness could have spoken; and (b) in deciding whether to draw inferences of fact, which are open … upon evidence which has been given, again in relation to matters with respect to which the person not called as a witness could have spoken": O'Donnell v Reichard (at 929).
4. It transpired that those acting for the solicitor had in fact served a subpoena to give evidence on the broker. The subpoena was served on 8 March 2021 with a covering letter explaining what the broker had to do. On 12 March the solicitors wrote again to the broker informing him of the court in which the matter would be heard and sitting times. They reminded him that a failure to attend without a lawful excuse was a contempt of court.
5. On Sunday 14 March at 10:04pm the broker sent an email to the solicitor's lawyer attaching a so-called medical certificate from a chiropractor indicating that he was unfit to attend at court on Monday, 15 March. A similar certificate was emailed to the Court. The email from the broker to the solicitor's lawyer concluded by saying: Also, I want to put in motion for the subpoena abuse of process and Opressiveness (sic) of plaintiffs.
6. That afternoon the lawyers for the solicitor sent an email to the broker noting receipt of his email and medical certificate, and pointing out that the subpoena required his attendance on every day that the proceedings were listed for trial. They said he was required to attend the following day. There was evidence that that email was read by the broker. The broker then sent a further email on that day saying he would send another medical certificate for the Tuesday, and pointed out that he had his own matter in Court the following day. The solicitor's lawyers responded by pointing out that the matter he had in Court was only a directions hearing before the Registrar, which would not prevent him attending in the present matter pursuant to the subpoena. Thereafter, the correspondence ceased. The broker did not attend at any time.
7. On the assumption that the broker was in the solicitor's camp, counsel for the plaintiffs submitted that an application ought to have been made by Wednesday to have the broker arrested and brought to Court. Senior counsel for the solicitor submitted that his instructing solicitors had done everything they could to bring the broker to Court.
8. In the first place, I do not consider that any conclusion should be reached that the broker was in the solicitor's camp simply because the solicitor's lawyers had subpoenaed the broker to attend to give evidence. Indeed, the fact that it was necessary for the solicitor's lawyers to subpoena the broker might be an indication to the contrary.
9. On the other hand, a broker is ordinarily considered to be the agent of the borrower (Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 308; ANZ Banking Group Ltd v Bragg (No 3) [2017] NSWSC 208 at [47]-[49]), and in that way it might be asserted that the broker was more likely in the camp of the cross-claimants. A matter telling against that is the fact that the cross-claimants brought a cross-claim against the broker. However, that claim was settled, and an inference might be available that, in such circumstances, the broker would give evidence on behalf of the cross-claimants. Further, the cross-claimants had the onus of proof of showing that the solicitor did not adequately advise them and it was, therefore, relevant to have regard to their ability to adduce evidence on issues where the broker could shed light: RHG v Ianni at [77].
10. When all of these matters are balanced, I do not consider that the broker can be regarded as having been either in the camp of the cross-claimants or of the solicitor. There can be little doubt that the evidence from the broker is likely to have clarified some issues in dispute. I do not, however, consider that the broker should be regarded as having been in the camp of the solicitor, so that the failure of the solicitor's lawyers to have the broker arrested for failing to comply with the subpoena can result in an inference that the broker's evidence would not have assisted the solicitor. To use a term taken from the criminal law (Meakin v R [2018] NSWCCA 288 at [136]), the position of the broker here was intractably neutral.

The cross-claimants' case

1. The parties agreed that the documents contained in the exhibit to the broker's affidavit should be received in evidence, but the affidavit was not read, and I have had no regard to it.
2. The case that was run against the solicitor differed very considerably from the case which was pleaded against him in the cross-claim. In the cross-claim it was pleaded that the solicitor was actually the solicitor for the lenders, but he misrepresented to the cross-claimants that he was acting for them. It was pleaded that he was responsible for the cross-claimants entering into the loan arrangement because he did not ensure that they were given independent legal advice by another solicitor. It was pleaded that the solicitor engaged in unconscionable and unconscientious conduct towards the cross-claimants which resulted in them executing the loan documents. Somewhat inconsistently, it was alleged that the solicitor was their agent in dealing with the plaintiff.
3. Notwithstanding the evidence which was filed by the plaintiff and the other parties, demonstrating beyond doubt that the plaintiff had Summer Lawyers acting for it, and that those lawyers regarded the solicitor as acting for the cross-claimants, those acting for the cross-claimants continued to pursue this line in written submissions filed immediately before the hearing in March 2021, namely, that the solicitor was not the solicitor for the cross-claimants, and that they did not receive independent legal advice from another solicitor. This case was, however, abandoned by the time of oral submissions.
4. Further, notwithstanding the evidence filed on behalf of the solicitor that he had properly verified the identities of the cross-claimants by viewing various identification documents, including photos of them with their identification documents, the cross-claimants maintained that the solicitor had failed to verify their identities, although there was in fact no issue as between any of the parties, including the plaintiff, that the cross-claimants were who they said they were. I accept, however, that it is possible the matter was pursued as touching the solicitor's credit, although on the cross-claimants' case, it was they who had forgotten to bring their passports in to the conference on 26 September.
5. The only substantive thread of the cross-claim which continued to run through the actual conduct of the cross-claimants' case was the claim that the solicitor had not explained the loan documents to the cross-claimants adequately or at all. In that regard, I note that a great deal of time was spent at the hearing in relation to what occurred at the meeting of 21 September 2018 when the cross-claimants did not commit themselves to any course of action, apart from signing the indicative letter of offer. That is a matter of some significance in relation to the absence of the broker as a witness at the hearing, because the absence of the broker's evidence at the hearing was said to be particularly relevant to the meeting of 21 September. He was not present at the conference on 26 September when the documents were explained by the solicitor to the cross-claimants.

Witnesses

1. All of the witnesses were challenged as to their recollection of events. Putting to one side for the moment the evidence of Bilal, the impression that I had of Mr and Mrs Mahmassani and the solicitor was that each of them was endeavouring to give truthful evidence. The issue with these witnesses was whether the evidence they were giving was credible or reliable.
2. In Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd's Rep 403, Lord Pearce discussed credibility. He first discussed two matters concerned with truthfulness, and then went to say (at 431): Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by overmuch discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.
3. In Watson v Foxman (1995) 49 NSWLR 315 and 319, McLelland CJ in Eq made the following remarks: …human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
4. In Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) Leggatt J said: [15] An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory. [16] While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people's memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate. … [18] Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time. [19] The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well. … [22] In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.
5. Finally, in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Gleeson CJ, Gummow and Kirby JJ said: [31] Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.
6. In the present case, there was the further problem that English was not the first language of either of the cross-claimants. In the case of Mrs Mahmassani, although most of her evidence was given through an interpreter, she was clearly able to speak and understand some English. Mr Mahmassani generally gave evidence in English, although at times the assistance of an interpreter was needed. Additionally, Mr Mahmassani said in his affidavit that he forgets names and information, and sometimes he keeps a notepad to record important dates or events. He did not rely on any notes to support any evidence he gave.
7. One of the significant problems that led to the differences in recollection between the cross-claimants on the other hand, and the solicitor on the other, was that it seems likely that each side was led to believe a different state of affairs by the broker and probably Bilal. In that way, the cross-claimants first saw the solicitor in circumstances where they thought only that they were obtaining a loan, albeit with their house as security. On the other hand, the solicitor had clearly been led to believe by the broker that he was to advise the cross-claimants regarding the sale of their property to Bilal.
8. There was the added matter that, probably in conjunction with Bilal, the investors assisted the cross-claimants to believe that they were simply providing their house as security for a short-term loan which would be repaid by them, with the result that not only would the cross-claimants not have to pay any interest on the loan, but that their property would not be at risk.
9. There is little doubt that Bilal deceived his parents. He told them that the investors were his friends who were trying to help him deal with the problems he had in relation to large debts owed to other people. If his parents trusted the investors, and it seems that they did, that was because of Bilal's deceit. He further deceived them by registering the company, Menara Traders Pty Ltd and appointing them as shareholders and directors without their knowledge. He deceived them again by not telling them that he was told by the broker that he needed to sign the contract of sale because of the lender's requirements.
10. Quite apart from these matters, I did not find Bilal a very satisfactory witness. He gave some evidence which was not in his affidavits, not the least of which was that the purpose of giving the borrowed moneys to the investors was not to pay them back, but so they could invest it along with other money, so that within three months, or possibly six, not only would the loan be repaid to Secured Lending, but a number of his other investors would be repaid in whole or in part. Not only was this completely new evidence, it was also inconsistent with his affidavit evidence, and that of his parents, that the purpose of the loan was repaying the two investors. The whole basis for his distress and the need to approach his parents was that he had signed a piece of paper saying that he would repay them in four weeks, and for every week he was late they would chop off one of his fingers.
11. His dishonesty towards his parents, and the unsatisfactory aspects of his evidence, cause me to scrutinise his evidence with care. Not all of it was unreliable. In some respects he corroborated aspects of the solicitor's evidence as I shall discuss.

Sifting the evidence

1. The solicitor said that on or about 17 September 2018 the broker asked him if he could prepare a draft contract for the sale of a Rydalmere property. The solicitor said he was happy to do so but he needed to meet the clients first. The broker continued to press him about the matter.
2. On 20 September at 6:35pm an employee of the broker, Mohamed Sowaid, sent an email to the solicitor saying: How are we looking with the executed COS? The deal is basically riding on this document. KD, Is 60% against a valuation of 1.2m enough? There were three documents attached to that email. They were described as, "Certificate; rates notice; cert of title".
3. The prior email in the chain was one from Andrew Margi of the broker's firm, First Finance Choice. It had been sent at 6:21pm on 20 September to Mr Sowaid and Gerrard Toltz of Toltz Lawyers.
4. That email said: Moh, I called an agent that I know in this area to get an appraisal as I own property in Gladesvillle so I am very familiar with the location and do agree with my agents (sic) advice that the market value is 1.2m. RP data shows less so the sale is crucial. See attached. We could consider a 50%-60% LVR if sale is real so please contact client and have borrowers send through executed COS with lawyer details who acted for this sale. Gerrard from Toltz Lawyers will make contact and verify our lenders exit so we can issue term sheet ASAP.
5. Ms Tibbey of counsel for the cross-claimants pressed the solicitor on the basis of that attached email to show that the solicitor must have known that the arrangement involved a loan to them. The solicitor maintained that he did not know that the cross-claimants were borrowing money until the conference on 21 September when the indicative letter of offer was produced. The solicitor said that the information in the attached email only indicated that the purchaser of the property was obtaining a loan, hence the concern about the extent of the LVR and the value of the property.

Meeting of 21 September

1. The solicitor gave evidence that on 21 September, prior to him being told about the meeting with the cross-claimants that afternoon, the broker pressed him again about the contract of sale, saying that the clients needed to sell their property urgently to their son. It was at that time that the broker asked the solicitor if he was able to see the cross-claimants that afternoon when they were going in to see the broker.
2. It is also apparent that for the broker to obtain the loan, it was necessary to prove to the lender that there was to be a contract by the cross-claimants selling their property. So much is clear from an email sent by Mr Sowaid to Mr Margi at Secured Lending of 20 September at 12:04pm, where he sought finance on a short-term basis for the company Menara Traders Pty Ltd, and with the "exit" being "sale of property to son (contract of sale to follow)". It is also clear from Bilal's evidence that the broker had told him on 15 September that the signed contract of sale was not "legally binding" (as he put it); rather, it was just to make the loan go through. As the evidence unfolded at the conference on 21 September, that evidence of Bilal's is likely to be true.
3. I accept the evidence of the solicitor concerning what transpired at the meeting of 21 September 2018. I accept that he was not aware of the loan to the cross-claimants until the broker announced at the meeting that the cross-claimants would be taking out a loan against their property, and it was in those circumstances that Bilal was purchasing the property from his parents.
4. There was nothing to suggest that the solicitor knew that the lender simply needed to see a signed contract of sale to facilitate the loan, or that it was a ruse to get the loan; in other words, that the lender was being deceived by Bilal and the broker and, unwittingly, by the cross-claimants. Indeed, his evidence of what he advised on 26 September shows that he was unaware of that arrangement between Bilal and the broker.
5. I accept that the solicitor continued to believe that the arrangement was as the broker explained to him on 21 September, that this short term loan was needed urgently, so that the property could be transferred to Bilal within a matter of months to enable him to obtain finance on less onerous terms.
6. I do not accept the evidence of the cross-claimants that the solicitor said that he was acting "for both of you" meaning the cross-claimants, Bilal and the investors. It is inconsistent with the solicitor's other evidence, which I accept, of what he said at the meeting on 21 September, and of his actions at the conference on 26 September of excluding the investor who was present from the meeting.
7. Mrs Mahmassani's evidence was entirely unsatisfactory about this meeting. In her affidavit she said that the solicitor introduced himself to her and said that he was acting for all of them. In her oral evidence she first denied that the solicitor was present at all on 21 September. She said she only saw the solicitor at the second meeting on 26 September.
8. Towards the end of her cross-examination, Mrs Mahmassani accepted that the solicitor was present on 21 September. She then went on to give inconsistent evidence about what took place. She said: Q. And Mrs Mahmassani, is it the case that now you don't remember anything that Mr Jamal-Eddine said that day? A. INTERPRETER: I remember that he was talking a lot, but like I said to you, I didn't understand the English, because it was very fast. Q. I thought, Mrs Mahmassani, that you couldn't quite remember whether he was there at all; isn't that right? A. INTERPRETER: When I said it here, I remember all of that, at that time. Q. Do you have a clear recollection of him being there at that meeting on 21 September, or not? A. INTERPRETER: He was present. He was present, and there was also a girl who came and offered us coffee. Yeah, she gave us coffee. Q. And can you remember now anything that Mr Jamal-Eddine said that day? A. INTERPRETER: He spoke, but he didn't give us any advice. He was supposed to give us advice, but he didn't give us any advice. He told us how they were going to give us the loan, and the interest, and how many months, so we have interest, and how many months. I didn't talk much. We were sitting there the whole time. He said a lot of things, but he didn't say - he said to us, we have to pay the loan in three months, and we have to pay the interest, and I said - and I said to him, "They're going to pay the interest, not us", so he should have advised us and say then they have to sign that they were going to be - if they're going to be paying the interest. Q. Mrs Mahmassani, do you have a clear recollection of what he said that day, or not? A. INTERPRETER: I did tell you he said a lot of things, but I don't know what he said because he was talking in English, and really quickly. Q. Did you hear the solicitor say anything in Arabic that day? A. INTERPRETER: No, who is going to speak in Arabic with? No, he didn't speak in Arabic. Cause they all speak English. Q. Could you understand what Mr Jamal-Eddine was saying that day, or not? A. INTERPRETER: No.
9. Her evidence that the solicitor did not speak Arabic was contradicted by Mr Mahmassani and Bilal, who agreed that some Arabic was spoken. Moreover, since the solicitor can speak Arabic and knew that Mr and Mrs Mahmassani spoke Arabic, and that their English was less than perfect, there is a high likelihood that the solicitor did speak to them in Arabic from time to time when explaining the documents.
10. Her evidence that the reason she did not ask the solicitor to explain matters in Arabic because he could not speak it should, therefore be rejected. This reason is of recent invention, even if it is accepted that she has genuinely forgotten that the solicitor spoke Arabic. The true reason is likely to be that she simply followed her husband's lead, and signed whatever he signed.
11. Despite saying that she could not understand what the solicitor was saying, it may be observed that she detailed a number of things he did say.
12. Mrs Mahmassani understood by the end of the meeting on 21 September that part of the loan arrangement was for Bilal to buy their house. Although she blamed the investors for forcing Bilal to do that, the evidence tends to support the solicitor's evidence that he had been asked to see the cross-claimants in relation to a sale of the property to Bilal, and that he found out during the meeting that it was part of the loan arrangement. He had not read the letter of offer; he merely said that his name could be placed on it as their solicitor.
13. In my opinion, Mrs Mahmassani has either confused what happened at the conference on 26 September with what happened on 21 September, or she has confused who said the things that she gave evidence about. It is likely it was the former, because she gave this evidence: Q. And you were given the letter of offer; you've told us that? A. INTERPRETER: That wasn't the first time. That was the second time. It wasn't on 21 September, no. It was on the second time that they gave us the papers. On the first time, yes, we were talking. Q. Was the first time that you went there, 21 September? A. INTERPRETER: Yeah, it was the first time that I went. Q. And I suggest to you that on that occasion, at those offices, you signed the letter of offer; is that not correct? A. INTERPRETER: I don't know. I don't know if that was the first time or the second time. I remember, though, we signed the papers the second time, when the solicitor came, because the solicitor wasn't present the first time, so how can we sign on papers if he's not present?
14. I do not accept that the solicitor said anything about the loan arrangements on 21 September.
15. Mr Mahmassani said in both his affidavit and in his oral evidence that the solicitor was present at the meeting, but claimed in his oral evidence that the solicitor said "I represent the company" which Mr Mahmassani variously said was Secured Lending and Concordia. The solicitor may have said that Concordia was the name of his legal firm; he certainly did not say that he represented Secured Lending.
16. The solicitor gave evidence that Mr Mahmassani referred to the investors as his son's business partners. Although the cross-claimants and Bilal denied that in their affidavits, Bilal volunteered in his evidence that this was said. The evidence was as follows: Q. Were Mr Zreika and Mr El-Chami in the meeting as well? A. Yes, they were. Q. Was something said about who they were? A. That they were, essentially business partners with me. Q. Who said that? A. I know it was mentioned. Q. Was it your father? A. Most likely it was, yeah. Q. Did your father say something like, "These are my son's business partners who are also like my sons." Do you remember him saying something like that? A. Not "like my sons". HIS HONOUR: Q. Had you told your father they were your business partners? A. Well, I mean, we had a meeting and there was an agreement that this money was going to be used for business purposes, to be invested so I can - so naturally out of that, we were working together. So, yeah, my parents knew that. Q. Sorry-- A. Sorry. Q. --the question I asked was, did you tell your father that they were business partners of yours? A. It wasn't stated that they were business partners. I never said they are my business partners. But it's just, it comes out of the natural situation that, of what we were in, getting funds and trying to work and do something from it.
17. It may be observed that Bilal, in response to an entirely non-leading question, answered that they were said to be "essentially business partners with me", and that it was most likely his father who said it. That evidence is not only corroborative of the solicitor's evidence, but highlights the depth of the deception of his parents by Bilal about those men.
18. I accept, however, that the solicitor is mistaken in remembering that Mr Mahmassani referred to the investors as his sons. It makes no sense that he would have done so. He was not trying to achieve anything at the meeting; he was reluctantly there, and had no reason to gild the lily about them.
19. Mr Mahmassani denied that there was any discussion about a contract of sale or that he was shown a contract of sale at the meeting. When he was shown a copy of the front page of the contract with Bilal's signature on it during cross-examination, he claimed that that was the first time he had seen that document.
20. I do not accept that evidence. It is inconsistent, not only with all of the email evidence that pre-dates the meeting of 21 September as well as the solicitor's evidence, but it is also inconsistent with what Mrs Mahmassani said twice in her first affidavit, that the investors put the Contract of Sale in front of Bilal and pushed it towards him, and Bilal's evidence that he signed the contract at that meeting. Mrs Mahmassani also said in her oral evidence that she heard Mr Zreika say to the broker at the meeting that Bilal would buy the house. She assumed, therefore, that the document she saw pushed towards him was a contract of sale. After they left the conference, she asked Bilal why he was buying the house when he had no money.
21. Although Mr Mahmassani said that he was not thinking of selling the house, that evidence did not sit easily with admissions that he made that he had been asking an estate agent how much the house was worth, nor with the evidence from the solicitor that Mr Mahmassani told him on 26 September that he had spoken to an estate agent who had talked about what a smaller property near his had recently sold for.
22. I accept the evidence of the solicitor that he indicated that he was prepared to act for the cross-claimants in relation to the loan, but that he did not know by the end of the meeting of 21 September whether the cross-claimants intended to retain him.

Meeting on 26 September

1. Mrs Mahmassani said that they went back on 26 September. The solicitor, the broker and the investors were present. They talked, and her husband listened. She did not understand when they talked. They were asked if they brought their passports and Mr Mahmassani said no. She then said: 52. The solicitor and broker spoke English to me and my husband and spoke Turkish with each other. The solicitor placed a number of documents in front of my husband and said to my husband words to the effect of: Look, you have to sign here and here. And he pointed to the open documents as there were no stickies. The documents were open where we had to sign. Then my husband signed. The solicitor said to me: "Sign here and here" pointing to where I had to sign and I signed. The solicitor didn't say anything after we signed. He took the documents.
2. It was the wrong that the solicitor and broker spoke to each other in Turkish because the solicitor does not speak Turkish. The broker did not speak Arabic. They must have communicated in English.
3. In cross-examination, Mrs Mahmassani agreed that the solicitor read some of the documents but not all of them to them. She then gave this evidence: Q. And you understood when you went there that day that you were going to be signing documents that mortgaged your house for the loan, didn't you? A. INTERPRETER: Of course. Of course, but I did not know that they weren't going to pay back the money, and this was going to happen to me. Q. As Mr Jamal-Eddine started going through the documents with you and your husband, your husband put his reading glasses on to look at the documents, didn't he? A. INTERPRETER: Yes. But he read just a bit. He cannot read quickly. Q. Mr Jamal-Eddine told you in that meeting, didn't he, that the loan was a short term loan for three months? A. INTERPRETER: Correct. Q. He told you that if the loan was not repaid within three months then your house would need to be sold to pay the lender? A. INTERPRETER: They did not say that to me, no. He said to me it can be renewed for another three months. Q. Did he say that to you in English or Arabic? A. INTERPRETER: I did not hear him speak in Arabic. Q. So it was in English, was it? A. INTERPRETER: Of course. Q. He told you in that meeting, didn't he, that the total amount of interest on the loan was $45,000? INTERPRETER: Sorry, can I just double check that question, the total is $45,000 of interest for three months? Did you say three months? PRIESTLEY: Q. No, he told you that the total amount of interest on the loan is $45,000? A. INTERPRETER: He said to me, "We'll give you 750, and will take a hundred for the first three months in interest, 100,000. And it can be renewed." And I said to him, "I will not be paying interest." Ghazi said to me, "I will be the one paying the interest." Him and Khaled El-Chami. Q. Mrs Mahmassani, Mr Jamal-Eddine never said anything to you about $100,000 in interest, did he? A. INTERPRETER: They said to me they will take a hundred, they will take 100,000, for the first three months. … Q. He told you, Mrs Mahmassani, that the interest was prepaid and taken out of the loan at the start, didn't he? A. INTERPRETER: Correct. Q. And he told you that the borrower is the company you have set up, Manara (sic) Traders? A. INTERPRETER: The one that was set up by Khaled and Ghazi. Q. He told you that that company was the borrower, didn't he? A. INTERPRETER: He told me that the company was the borrower - they opened it, they opened it so they would return the money. Q. Mr Jamal-Eddine told you in that conference that the company was the borrower, didn't he? A. INTERPRETER: I did not hear that. I did not hear that from him. Q. You already understood before that conference that the company was the borrower, didn't you? A. INTERPRETER: No, I did not know the company was going to be borrowing, no. … Q. He told you, didn't he, that it was a condition of the loan that you would sell your house at the end? A. INTERPRETER: They will take the house if we don't pay them the money. Khaled and Ghazi they said, "Don't worry, we will pay everything. Even the interest and the amount." Q. You say he told you that they would take the house, meaning the lender, if you didn't pay back the money. Is that right? A. INTERPRETER: If we don't return the money, of course. But they knew that I was a pensioner and I don't have money to pay back. And they were the ones who promised to pay everything. Q. He told you, didn't he, this is Mr Jamal-Eddine, that you were agreeing into a contract for the sale of your house within two months of signing the documents? A. INTERPRETER: No. Q. By the time of this meeting, you already knew that Bilal had said that he would buy your house? A. INTERPRETER: I did not know, and Bilal did not say a single word. Ghazi and Khaled, they had it all in their hand. I don't know what it was that they had in their mind. This is why they threw the paper in front of him to sign. Q. But there was discussion only five days earlier in the meeting of the 21st, wasn't there, in which it was said that Bilal would buy your house? A. INTERPRETER: When we were signing the papers. Q. On the 21st, there was discussion, wasn't there, about Bilal buying your house? A. INTERPRETER: No. No, first discussion there was, and when we were signing the papers, that's when they threw the paper in front of him. Q. Mr Jamal-Eddine said to you in the meeting of the 26th, the second meeting, "Do you know how much the property is worth?" Do you remember him asking that? A. INTERPRETER: Yes, I know its worth. Everybody knew its worth. Q. I just asked you, didn't he ask you that in the meeting? A. INTERPRETER: It was asked, so they can guarantee how they're going to get their money back. Q. Mr Jamal-Eddine asked you and your husband that question, didn't he? A. INTERPRETER: Yes, he did ask me that question, so he knows - so he knows the value of the land, so he knows how much they can give us. … Q. Your husband said to Mr Jamal-Eddine, "I'm sure we can get at least $1.2 million for the house", didn't he? A. INTERPRETER: Correct, and my house was worth more than that. Q. And your husband said to Mr Jamal-Eddine, "I spoke to an agent before this meeting, and a property near ours just sold for 1.2 million"; is that correct? A. INTERPRETER: Correct. Q. And your husband said, "I will get more than that", didn't he? A. INTERPRETER: Yeah, our house was worth 1.5.
4. Although somewhat confused, and internally inconsistent in parts, the evidence tends to support some significant parts of the solicitor's account, and it is to be contrasted with her affidavit evidence of the conference at [106] above.
5. Mr Mahmassani gave this evidence: Q. He asked you, didn't he, in that meeting, "Do you know how much the property is worth"? A. Yes, that time, two years ago, two and a half years ago, 1978(as said). He offer what, 1.3, 1.5, something. Q. Sorry, I'm just asking you, did he ask you? A. Yeah. Q. "Do you know how much it's worth"? A. The, if we would sell it? Q. Yes? A. Yeah, he did ask the question. Q. Did you say to him, "Why are you asking that"? A. I remember he asked me how much your house worth, because, then I went to the travel, estate agent. And I ask him, he said, between 1.3 and 1.5, that time, two and a half years ago. The house worth this much. He say "If you want to sell it, you can sell it and pay him the money back. And keep the rest of it for yourself", you know? That's what he said to me. He offered me to buy another house. … Q. And you said to him, didn't you, that you were sure that you could get at least $1.2 million? A. I don't think so. Because they ..(not transcribable).. the lawyer, Mr Jamal did. Q. You said that to the lawyer? A. Yeah. Q. "I am sure we can get at least $1.2 million"? A. Yeah, that time, yeah. Q. And you said to him that a property just near yours had just sold for 1.2 million? A. Yeah, that's correct. Two and a half years ago now. Q. During the discussion with the solicitor about the documents, you said to him, "The interest rate is very high", didn't you? A. Yeah. Honestly. Yeah, I know it's too high, you know, because I was, I thought in the beginning it's only 2% a year. Now, 4% they start, they said we reduce it to 2% after six months. The term was too high, he said, because you will owe them, you know, and ..(not transcribable).. Even he mentioned ..(not transcribable).. He said, they wanted to put, get insurance for the loan. He say now because too old, one of them said, I'm not sure which one, the other one, said the loan, the man, is too old. They will, can't get the insurance for him. Q. After you said to the solicitor "The interest rate is very high", he said to you, didn't he, "You don't have to take out the finance if you don't want to pay such high interest." The solicitor said that? A. No. Q. And you said to him, I suggest, "No, we need the money urgently", didn't you? A. Yeah, maybe I said I need the money. But not urgently. I don't know where you got this "urgently" from. Q. And again I suggest you said to him, "I do not even want to go to the local mosque anymore, because of what this issue has done to my reputation." You said that to the solicitor, didn't you? A. Yeah, I mentioned that before. I answer this question before.
6. In relation to the mortgage document he gave this evidence: Q. Mr Jamal-Eddine read it out to you, didn't he, in English, before you signed it? A. Must be, because I wouldn't sign it without, the, yeah, I think so. Q. And he explained it in Arabic, after he'd read it out in English, didn't he? A. In English, I mean, yeah. Q. Did he not also then explain the meaning of the document in Arabic? A. Sometime he say a few words if you, if you don't understand it. Say words in Arabic, but of course in English, because he read it in English, not in Arabic. Q. So sometimes he would explain some parts in Arabic, would he, of those documents? A. Yes, word like, if anything, like executed on behalf - now I understand it, before I didn't understand what executed, you know, means.
7. He said that anything to do with selling the house wasn't in his mind because he did not expect it to happen. It was put to him that the solicitor read each of the documents that the cross-claimants signed and Mr Mahmassani said "Maybe he read it, but I didn't take much notice of it".
8. Mr Mahmassani was asked about signing the minutes of the meeting of Menara Traders. He said, Maybe I signed it, but I don't remember that. He said he could not remember everything but some things he remembered very well. It was put to him that the documents were important and he said: At that time I wasn't thinking about whether it was important or not important.
9. He said that he never said to the solicitor that he was going too quickly. He was asked was there some reason he did not read all of the documents and he said: A. WITNESS: Because I was - just didn't have - I wasn't concentrating too much. I wasn't taking much seriously thing. I thought just formality, Court formality and just..(not transcribable).. formality. Just paperwork - Q. Just a formality? A. WITNESS: Yeah, formality. A. INTERPRETER: Yeah, it's formality, isn't it?
10. In relation to the conference on 26 September, the solicitor made a file note immediately after the conclusion of the conference. The file note in its entirety read: • Discussed loan docs in detail with clients LD loan amount: $750k Rate: 2% Term: 3 months • Advance to "Menara Traders Pty Ltd" • Guarantors: Khaled and Ghada Mahmassani • Security: 168 South Street Rydalmere NSW • Discussed repayment strategy as clients have no income to repay loan List property 168 South Street for sale Contract of sale must be executed within two months • Verification of clients completed • Explained need and discussed schedule and certificate Clients understood and signed • Clients signed in their capacity as directors of the company and also in their personal capacity as guarantors.
11. While the file note certainly does not corroborate the detail of what the solicitor says was discussed in the meeting, it provides good support for a number of matters, including the significant one about the requirement to sell the house, and to do so within two months. Further, both Mr and Mrs Mahmassani agreed in cross-examination that a number of parts of the conversation set out by the solicitor in his affidavit were in fact discussed with them.
12. They agreed that the solicitor said that the loan was for three months, although they said that he told them they could get an extension of it to six months. I do not accept that the solicitor said that to them. He was not the solicitor for the lender. There was nothing in the documents which suggested that the loan could be extended, except a reference to a rollover fee in a document headed Schedule B. At best, the solicitor could have said that they might be able to ask for an extension of three months, but on the state of the evidence I am not prepared to find that he did so. It is not consistent with his refusal to negotiate with the lender on the interest rates; as he said, his role was to advise them on the documents he had. It is far more likely that it was the broker or the investors who told the cross-claimants that the loan could be extended to six months at an earlier time.
13. The cross-claimants agreed that the solicitor said that the interest was pre-paid and would come out of the loan, although Mrs Mahmassani wrongly thought or remembered that the amount was $100,000. Mr Mahmassani remembered that the solicitor told him about the interest rate, which Mr Mahmassani thought was very high. He remembered that the solicitor mentioned that a number of fees had to come out of the money they were borrowing. He remembered the Cheque Directions document which he signed, saying that he remembered seeing, "Menara Traders, Commonwealth Bank". In his first affidavit, Mr Mahmassani said he knew that the bank account he opened at the CBA Parramatta with the investors was in the name of Menara Traders Pty Ltd. I find that the cross-claimants knew that the money from the loan was to be paid to Menara Traders Pty Limited.
14. Mrs Mahmassani agreed that the solicitor said that if they did not repay the money, the lender could take their house, but Mr Mahmassani did not remember that this was said. Mr Mahmassani agreed that the solicitor told them that they were guaranteeing the loan. They both agreed that the solicitor explained some of the documents.
15. They both denied that the solicitor said words to the effect: It is a special condition of the loan that your exit strategy for the loan is the sale of your house and that you agree to enter into a contract for the sale of your house within two months of signing these documents. However, on the basis of the diary note I reject their denial, and accept that the solicitor did in fact point out that special condition of the loan arrangement. While I accept that they did not understand the English term "exit strategy", the solicitor said that he explained that to them in Arabic.
16. Both of them agreed that there was discussion at the conference about how much their house was worth, although Mr Mahmassani denied at first that the house was mentioned at all. Both agreed that Mr Mahmassani said, "I'm sure I can get at least $1.2m for the house", and that Mr Mahmassani had spoken to an estate agent about its value. It is difficult to understand why the value of the house was being discussed if there was no intention to sell it.
17. The file note and the specific matters which the cross-claimants agreed had been discussed by the solicitor undercut the evidence given by the cross-claimants in their affidavits of what occurred at the meeting. Mr Mahmassani said: 31. When we arrived, the lawyer, Mr Ammar Jamal-Eddine, brought a big bundle of papers. He gave a brief explanation, reading through very fast. I recall that he said words to the effect that the loan had to be repaid, that it was for three months and could be extended for a further three months. I do not recall him saying that our house could be sold if it was not paid back. 32. My wife and I were handed a number of documents and told in words to the effect of "Read these and sign each page". I did not have my reading glasses and did not read the documents properly. We were not asked if we wanted to take the documents home or consider them further. My wife and I signed the pages. 33. The entire meeting was over within 20 to 30 minutes. …
18. I am entirely satisfied that the solicitor explained the special conditions of the mortgage, that they were to enter into a contract for the sale of their house within two months of signing the documents. I am satisfied that the cross-claimants knew, both from their past experience with mortgages, and from what they were told by the solicitor, that if this loan was not repaid, they could lose their house. Both the solicitor and Mrs Mahmassani said that Mr Mahmassani had his reading glasses with him. In any event, Mr Mahmassani agreed that he read some of the documents, evidence corroborated by his wife.
19. A significant matter which points to the unreliability of the cross-claimants' memories, and the likelihood that they had discussed what took place and reached some sort of agreement about what occurred, consciously or unconsciously, comes from the assertion by both of the cross-claimants that they needed to return to the solicitor's office on 27 September for the purpose of taking Mr Mahmassani's passport. Each of the identification photographs provided by the solicitor to the lender's solicitors contains a handwritten note signed by the solicitor and dated 26 September 2018. The solicitor gave evidence that he took the photographs on that day, and he produced his old phone that had been used to show the dating that automatically appears on the phone when the photographs were taken. Although it was submitted that I should not accept that evidence, there was nothing to suggest that the solicitor was not telling the truth, and the phone evidence was compelling.
20. There was a suggestion in the evidence that the cross-claimants had attended the solicitor's office on 27 September to deliver the original CT. Their evidence concerning whether or not they took the CT on 21 September 2018 or at some other time, or whether it had been given to Bilal to provide to the broker at an earlier time, was entirely unsatisfactory.
21. The cross-claimants and Bilal all say that either Bilal said, or one of the investors said, on 21 September to Mr Mahmassani that he should take the CT with them to the conference. However, on 19 September, Bilal sent an email to the broker saying: Attached is the company certificate of registration. My father picked up the house deed today and I can drop it off tomorrow morning. I'll email the council rates later on today.
22. He was asked about that email, and he gave the following evidence: Q. And you did drop off the house deed the next morning, didn't you? A. No. I was never given the house deed. So, I was telling him, "Yes, I can drop it off for you", but I didn't have it at that stage. My father kept the house deed with him. Q. At what stage? The stage you wrote the email? A. Yeah, yeah. Q. But you did get it from your father and drop it off the next day, didn't you? A. No. Q. You are aware of how it might have come into the hand of Mr IIgun the next day? A. The house deed? Q. Yes? A. No, he did not get the house deed from me. Q. But do you understand how he might have got it? A. And this is even - and this is before the first meeting. Q. Yes, sir. A. Yeah. I did - I never had access to the house deed. I have never in my life - I've actually just once seen a glimmer of it. I've never even touched it. Q. I'm just asking you, do you know how Mr IIgun might have got it? A. Sorry, I don't. Q. So, you did not do what you said you would do in that email; is that what you're saying? A. It's - well, I said, "I can drop it off tomorrow morning", but I never did. I'd never had access to it. Q. So, you did not do what you said you were going to do? A. No. Q. Why did you not do it? A. I didn't have access to the house deed. Q. Why didn't you get it from your father and drop it off? A. My father would never release the house deed to me. Q. Why did you say to Mr IIgun that he would? A. Because if he asked for - at that - I mean, if he said, "Yes, come and drop it off tomorrow." I'll call my dad, "Can I get the house deed?" "No, you can't." If he gives it to me, I'll go and drop it off. It's just a conversation that I'm saying, "I can drop it off tomorrow. Maybe I bring my father and he'll drop it off", but I never actually had physical contact with the house deed. Q. I'm sorry, I don't understand your evidence. Can we just go back-- A. It says, "My father picked up the house deed"-- Q. Just let me ask a question, please? A. Okay. Q. You told Mr IIgun that your "father had picked up the house deed today"-- A. Yes. Q. --that's what you told him? A. Yes. Q. Was it true? A. Yes. Q. How did you know it? A. My father told me. Q. He told you that he had picked up the house deed; is that right? A. Yes, correct. Q. And do you now understand that to be a reference to the certificate of title for his home? A. So, you're telling me what's that the certificate of title is? Q. No, sir. I note your long pause and I'm just asking you is that what you now understand to be the same thing or not? A. No. No, sorry. No. I view them differently now. That's - there's a house deed and there's a certain of title which you can do on-line. So, no, house deed is completely - I think I know where you're leading to. Are you saying that did I confuse this email here to be the - to be the title instead of the house deed? HIS HONOUR Q. Mr Mahmassani, it might be best if you just answer the barrister's questions, please? A. Sure, certainly. PRIESTLEY Q. You understood on 19 September, didn't you, that your father had pick up the certificate of title? A. Okay. That - that could be the case. Q. And when you say "house deed" in that email, you were referring, to your knowledge, to the certificate of title, weren't you? A. Possibly. Q. You're not sure? A. I'm not sure. I'm saying possibly. Q. And when you said to Mr IIgun that "you can drop it off tomorrow morning", that was what you were intending to do, wasn't it? A. Correct, yes. Q. And you were intending to do it because you believed that you could and would get it from your father; correct? A. Correct. Q. So, why did you say a moment ago, "My father would never release it to me."? A. Because I was thinking of a different document. Q. What document would he never release to you? A. The ownership of the - the document that has ownership of the house. Q. Mr Mahmassani, you picked up the certificate of title from your father on the 19th or the 20th and dropped it off on the 20th to Mr IIgun, didn't you? A. No. Q. Just as you said that you would do, that is what you did. You deny that? A. Yes, because there was no meeting. The next meeting I went to after that was on the 21st. I didn't actually see Kadir again until that - we were all together.
23. Despite Bilal's denials of having provided the CT or a copy of it to the broker before 21 September, on 20 September at 12.04pm Mr Sowaid sent an email to Andrew Margi making an application for finance for Menara Traders. The subject was "Certificate of registration". There were three attachments to the email; one was the rates notice, one was "Certificate" (clearly, the certificate of registration of Menara Traders), and one was the certificate of title. Although it is conceivable that Mr Sowaid had only a copy of the CT, he could by 20 September only have obtained it from Bilal. That puts the lie to Bilad's evidence that his father would never release the CT to him.
24. Other evidence, however, points to the original CT only being provided to the solicitor on 27 September, as he maintained. On 27 September at 12.19pm he emailed Kenneth Lau at Summer Lawyers saying that the original CT and Loan Documents were available for collection at his office. The evidence from both of the cross-claimants was that they took the CT on 21 September and it was given to the broker at the conference. The broker already had a copy of it, and had no need of the original CT, particularly when the solicitor was to act for the cross-claimants.
25. I reject the evidence of the cross-claimants and Bilal that anything was said about bringing the CT on 21 September, or that it was given to the broker at the conference on that day. Whilst anyone can make a mistake about dates and times, the fact that three persons made the same mistake raises a suspicion that this aspect of the evidence has been co-ordinated. In Mrs Mahmassani's oral evidence, when she was asked if Bilal said anything on 21 September about bringing the CT, she said (contrary to her affidavit evidence), No, we did not talk about the certificate of title. That was truthful evidence.
26. All of this evidence, and some of the other matters I have identified, points also to a conflation of various events in the evidence of the cross-claimants and Bilal.
27. There are two other aspects of the solicitor's evidence which I do not accept. The first concerns the length of the meeting of 26 September 2018. The solicitor asserted that the meeting went for three hours. The evidence of the cross-claimants was that it was much shorter, perhaps, about one hour.
28. Mrs Mahmassani said the meeting was only 20 minutes of half an hour. Similarly, Mr Mahmassani said the solicitor maybe spent half an hour, maybe less or more. He also said it maybe took an hour or between half and one hour.
29. Even allowing for the fact that there needed to be a translation of some of the explanation into Arabic, I think it is quite unlikely that the conference would have lasted three hours when regard is had to the documents that needed to be explained and signed. Having regard to all of the evidence, I consider it likely that the conference took about an hour or an hour and a half. It was certainly not 20 minutes or half an hour.
30. However, the length of the conference is not of itself significant. I am satisfied from the solicitor's evidence and from the file note that he made that the important aspects of the transaction were explained to the cross-claimants, and that they knew they were entering into a mortgage to guarantee the loan that was being made which was to be provided to their son and the investors.
31. The other matter concerns the solicitor's evidence in relation to Mr Mahmassani seeing an accountant and receiving advice from him. The name of the accountant and his details that appear on the indicative letter of offer was Bilal's accountant, as he admitted. The likelihood is that he provided that information to the broker, and that was how it came to be written on the letter of offer. The suggestion by Bilal that this person was his parents' accountant was another aspect of his deceit in relation to this transaction as far as both his parents and the lender were concerned.
32. It does not seem at all likely that a person in the position of the cross-claimants would have an accountant, and I accept Mr Mahmassani's evidence that he did not.
33. Mr Mahmassani, when asked when he first met the investors, said, "Yes, I think I met them first time with the accountant", but he then went on to say, "No, I saw them once with my son, in his house." I do not consider that Mr Mahmassani intended to say "accountant", and there is no other evidence, including from Bilal, that Mr Mahmassani ever met the investors (before 21 September) except in the presence of Bilal.
34. With the exception of those matters, I accept the solicitor's account of the meeting of 26 September.

Negligence and breach of retainer

1. In Artahs Pty Ltd v Gall Standfield & Smith (A Firm) [2012] QCA 272 the Queensland Court of Appeal said this concerning the obligation of a solicitor in relation to the explanation of documents: [58] A general starting point for identifying the obligation of a solicitor may be identified from the following passage from a leading text: "One of the principal areas in which the client looks to his solicitor for guidance is in the explanation of legal documents. Normally the client either signs such documents or permits them to be sent on his behalf in reliance upon the solicitor's advice. The solicitor owes a general duty to explain such documents to the client, or at least to ensure that he understands the material parts." (references omitted) [59] In Fox v Everingham, (Fox) a married couple had sued the solicitors whom they had retained to act for them in relation to a purchase of property. The Full Court of the Federal Court identified the obligation of the solicitors as follows: "The retainer given by the Foxes to the respondents obliged the respondents to act generally in the Foxes' interests in and about their entering into the contract and their taking of title to the property pursuant thereto. At the least that obligation required the respondents, either themselves or by an employee qualified to do so, to go through the contract with the Foxes and explain the salient points of it to them. In this way their principal rights and obligations under it would be explained as would the general course the matter might be expected to take. The respondents were also under an obligation to explain to the Foxes provisions of the contract which were in an unusual form … ." [60] In relation to giving advice to parties giving a mortgage and guarantee, Doyle CJ in National Australia Bank Ltd v Mitolo,said that the solicitor's obligation was: "… to take reasonable care to ensure that [the clients] understood in a practical way the effect of the guarantee and mortgage, and to satisfy himself that [the clients] appeared to understand the effect and potential consequences (from a legal point of view) of the guarantee and mortgage." [61] In Fox, the court said of the obligation of the solicitors: "The respondents were also under an obligation which required them to give attention, before the contract was signed by the Foxes, to the question of whether it, from their point of view, contained adequate provisions to protect them against a variety of contingencies which might reasonably have been foreseen as likely to arise if things did not go as expected. … The Foxes were entitled to rely on the respondents to see to it that the contract was adequate to protect their interests." [62] An Australian text identifies one of the obligations of a solicitor advising a client in a property transaction in the following terms: "A solicitor has a duty to warn of the risks inherent in the transaction unless the client is already aware of the risks." [63] That statement draws attention to the knowledge (and experience) of the client. In Carradine Properties Ltd v DJ Freeman & Co, in a frequently cited passage, Donaldson LJ said: "An inexperienced client will need and will be entitled to expect the solicitor to take a much broader view of the scope of his retainer and of his duties than will be the case with an experienced client." [64] Thus it has been held that there is no duty to explain a final share purchase agreement line by line to clients where instructions had originally been given by experienced commercial clients, drafts were sent to them from time to time, and there was need for speed in the transaction. Similarly, it has been held that it was unnecessary for a solicitor to explain to the client the effect of a priority limit in a short deed of priority, in circumstances where the client specialised in providing bridging finance for commercial and residential purchasers. However, it would appear that it is more accurate to say that a solicitor's specific obligation to advise varies with the solicitor's knowledge or reasonable belief (particularly if induced by the client's own representations) as to the client's expertise and knowledge relevant to the transaction. … [68] It seems to me that, subject to the express terms of the retainer, the underlying principle relating to the obligation of a solicitor acting for a purchaser is, adapting the words of Doyle CJ, to take reasonable care to ensure that the client understands in a practical way the proposed contract, including its effect and potential consequences. Because the obligation is to take reasonable care, the specific advice required and the terms in which it is to be expressed will vary depending upon what the solicitor knows, or reasonably believes, of the client's relevant knowledge and experience. The obligation will often extend to drawing attention to risks inherent in the transaction; and to inquiring about the client's access to the funds necessary to complete the transaction. In general, a solicitor should advise the client about ways by which the client might be protected from significant risks inherent in the transaction.
2. On the other hand, it is not part of the solicitor's job to advise whether or not they should enter into the transaction: Studer v Boettcher [2000] NSWCA 263 at [75]. In Banco Exterior Internacional v Mann (1955) 1 All ER 936 Sir Thomas Bingham MR said (at 950): Was it reasonable to expect a solicitor, in explaining the nature and effect of the document, to give appropriate advice. In my view it was. It is an ordinary incident of a solicitor's duty to explain the obvious potential pitfalls of legal transactions to those about to take part in them, and there is no clear dividing line between explanation and advice. If the certifying solicitor did his job with reasonable competence, as the Bank was entitled to expect, Mrs Mann would appreciate quite clearly that if the worst happened she could lose her rights in the house and that it was for her to decide whether she was willing to take that risk or not. It was no part of the solicitor's duty to advise her not to sign. It was enough if she would receive such advice as would leave her in no doubt of her right to decide whether she was willing in all the circumstances to take a risk which had been explained to her.
3. Based on the assessment of the evidence, which I have earlier discussed, I am satisfied that the solicitor explained that the loan was a short-term loan for three months, and that if it was not repaid within that time the house would need to be sold to pay the lender. The solicitor told them that it was a special condition of the loan that they had to enter into a contract for the sale of the house within two months of entering into the loan. The solicitor told them that they should not sign the loan documents until they had exchanged contracts to sell the property to their son so that he could obtain a loan against the property to pay out the lender from whom they were borrowing.
4. Ms Tibbey submitted that the arrangement here was pure asset lending, and that the solicitor did not ask them any questions about their ability to repay the loan. However, the solicitor knew that the cross-claimants had no income to repay the loan and that that was the basis for the exit strategy. He made a note to the effect that they had no income.
5. Pure asset lending may result in a contract being found to be unjust: Provident Capital Ltd v Papa [2013] NSWCA 36 at [107]-[113]. That is a matter between the lender and the persons liable for repayment of the loan. The designation of the loan as pure asset lending does not in itself create a liability in the solicitor advising on the loan. It may mean that the solicitor must take extra care to ensure that the clients understand the arrangement and the risks.
6. It may be doubted that this was pure asset lending. The lender, seemingly, knew that the mortgagors had no means of paying instalments. No instalments were required during the term of the loan, and interest was pre-paid for the whole term. In addition, the lender required proof of a contract to sell the property, probably to the son, but perhaps to some other person as the method of repayment. If the broker and/or Bilal were deceiving the lender about that contract of sale, there is no evidence that the lender knew that.
7. The evidence is that the solicitor explained to the cross-claimants the exit strategy that the lender stipulated. He did not know that the investors had told the cross-claimants that they (the investors) would repay the loan, nor that the cross-claimants believed that they would. He knew that Mr Mahmassani had talked to the real estate agent, and that he was confident he would get more than $1.2m for his house if sold on the open market. He explained to them that if the loan was not repaid the house could be sold, and he advised them to enter into a contract for sale before they took out the loan. The solicitor enquired of them before they signed the documents if they had understood what he had said and they agreed that they had. Even if pure asset lending was involved, I am satisfied that the solicitor took the appropriate care in his explanation and advice to the clients.
8. None of the particulars in paragraph 24 of the cross-claim has been made out.
9. Although not pleaded, Ms Tibbey said in oral submissions that there were other options available to the cross-claimants, and if the solicitor had driven home that this was a completely improvident transaction from their point of view, those options could have been explored. What had to be driven home, Ms Tibbey said, was that their house was at stake and could be sold. Her submissions did not expressly say that the solicitor ought to have outlined the other options, but that seemed to be implied.
10. I do not consider that the solicitor had an obligation to suggest other options. In any event, the evidence did not support the options that Ms Tibbey suggested, such as approaching other lenders or entering a reverse mortgage. Time was of the essence because of the threats that had been made to Bilal about what would happen if the money was not paid to the investors very quickly. The options were, in any event, very limited because the cross-claimants could not service a loan, and repayment was possible only by sale of the house to Bilal or someone else.
11. It was also submitted, although not pleaded, that the solicitor ought to have advised that the investors should sign some form of security to ensure that the money that was going to them would be repaid. Indeed, the submission was put as high as to say that he had a duty to secure enforceability from them.
12. In the first place, this was a matter that went well beyond any duty that was pleaded in the cross-claim. Secondly, the cross-claimants may have believed that the investors were going to repay the money (and they said that they did believe that), but there is no evidence that they said anything to the solicitor at the conference on 26 September suggesting that they were entering into the arrangement because of any reliance they had on anything that had been said to them by the investors. There was certainly evidence that the investors had said or suggested that to the cross-claimants in prior conversations, but there is no evidence that the solicitor was ever told of those prior conversations or that any such promise had been made by the investors.
13. The cross-claimants knew that their house was at risk if the loan was not repaid. They had entered into prior mortgages of their house, including for Bilal. For reasons I have given, I am satisfied that the solicitor explained to them the implications for their house, both the need to sell it within two months, and what would happen to it if the loan was not repaid.
14. It would have been far preferable, and the solicitor may have avoided the present claim, if he had confirmed the advice he provided to the cross-claimants in a letter written closely proximate to the conference of 26 September. The solicitor has no obligation to do so, but such a letter would ordinarily quiet any controversy that would otherwise arise from the sort of advice he was asked to give. However, the solicitor did the next best thing, which was to make a file note, reasonably contemporaneously with the conference, summarising the main matters discussed.
15. Ms Tibbey pointed to the solicitor's obligations under r 11 of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (NSW) regarding documents which must be completed and retained when a solicitor gives advice to a borrower/guarantor/mortgagor. It does not appear that the form of the document completed by the solicitor conformed with the requirements of the rule. Rather, the solicitor completed documents provided by the lender which, whilst similar, were not in the approved form.
16. Such a failure on the part of the solicitor is not evidence of negligence; nor did the cross-claim allege that it was.
17. The conclusion I have reached in relation to the issue of breach derives partly from what appears in that file note, partly from a general acceptance of the solicitor's evidence, partly from my doubts about the reliability of the evidence of the cross-claimants, and partly because I do not believe that the solicitor was told everything that the cross-claimants and/or Bilal and/or the broker knew about the events giving rise to the solicitor's retainer.
18. The solicitor did not breach his duty of care.

Unconscionable conduct

1. It is necessary to examine the pleading to understand the claim that is made against the solicitor in this regard. Paragraph 26 of the cross-claim pleads that, at the time of the meetings on 21 and 26 September 2018, the solicitor should reasonably have been aware or should have taken steps to ascertain whether the cross-claimants were in a position of special disadvantage in dealing with the plaintiffs "and their agent, the cross-defendant". Particulars are then given about the cross-claimants, their education, health and language difficulties.
2. The cross-claim then said that the cross-claimants repeated all of the cross-claim up to that point, which principally asserted that the solicitor was acting as the solicitor for the plaintiff and misrepresented the fact that he was acting as the cross-claimants' solicitor. In that way it was pleaded that the cross-claimants did not receive independent legal advice, that is, independent from the plaintiff and its agents.
3. Paragraphs 28 and 29 then plead: 28. In the circumstances and as set out in paragraphs 1-26 above, the First Cross Defendant engaged in unconscionable and unconscientious conduct under the general law, resulting in them executing an Mortgage and Guarantee which constituted an improvident transaction that was wholly or substantially unfavourable to the Cross Claimants, brought them no benefit and exposed them to the grave risk of losing their home, their main asset. 29. In the circumstances and as set out in paragraphs 1-26 above, the First Cross Defendant engaged in unconscionable conduct for the purposes of ss20 and 21 of the Competition and Consumer Act, 2010, Schedule 2, known as the Australian Consumer Law (NSW) pursuant to s28 of the Fair Trading Act (NSW).
4. It is very difficult to discern the basis for suggesting that the solicitor acted unconscionably, except to the extent that it is alleged that he wrongly claimed to be acting for the cross-claimants when he was in fact the solicitor for the plaintiff. The cross-claimants abandoned their claim that the solicitor acted for the plaintiff in the transaction. No amendment was made to the pleadings when that occurred, hence, the difficulty in being able to understand how, on the evidence, the solicitor acted unconscionably.
5. It may be accepted that it was part of the solicitor's duty of care to ensure that persons in a disadvantageous position to another party were protected. Ordinarily, that duty would be satisfied by the solicitor showing that proper advice was given to the clients in relation to the transaction they were proposing to enter. That, however, is an aspect of negligence, and does not give rise to any finding that a solicitor who fails in that way is guilty of unconscionable conduct.
6. In Bristol and West Building Society v Mothew [1998] Ch 1, the United Kingdom Court of Appeal deprecated the blurring of lines between a common law duty of care and, in that case, breaches of fiduciary duty. That was a case where a solicitor was being sued on the basis of statements he had made in relation to a transaction in which he was retained. The solicitor accepted that he had breached his duty of care. However, damages at common law were limited, and for that reason the representee wished to establish that the solicitor had also breached a fiduciary duty it was claimed was owed. On that basis, it was said that he would be entitled to equitable damages which would exceed those recoverable at common law.
7. The Court of Appeal referred to what had been said by Southin J in Girardet v Crease & Co (1987) 11 BCLR (2d) 361 at 362: The word "fiduciary" is flung around now as if it applied to all breaches of duty by solicitors, directors of companies and so forth. … That a lawyer can commit a breach of the special duty [of a fiduciary] … by entering into a contract with the client without full disclosure… and so forth is clear. But to say that simple carelessness in giving advice is such a breach is a perversion of words.
8. The Court of Appeal also quoted Ipp J (when a judge of the Supreme Court of Western Australia) in Permanent Building Society v Wheeler (1994) 14 ACSR 109 where his Honour said (at 157-158): It is essential to bear in mind that the existence of a fiduciary relationship does not mean that every duty owed by a fiduciary to the beneficiary is a fiduciary duty. In particular, a trustee's duty to exercise reasonable care, though equitable, is not specifically a fiduciary duty… The director's duty to exercise care and skill has nothing to do with any position of disadvantage or vulnerability on the part of the company. It is not a duty that stems from the requirements of trust and confidence imposed on a fiduciary.
9. The position is analogously the same in relation to unconscionable conduct. A solicitor's breach of his retainer or duty of care in failing properly to explain and advise in relation to a transaction to be entered into by his clients does not mean that he has acted unconscionably, even if his clients, vis-à-vis the other party to the transaction, are in a position of disadvantage that might enable them to assert unconscionability against the other party.
10. Apart from the assertion of a position of disadvantage by the cross-claimants in relation to the plaintiff, there is no other evidence or basis for finding that the solicitor has acted unconscionably. The claim is misconceived.

Misleading and deceptive conduct

1. Paragraph 30 of the amended cross-claim asserts that the conduct of the solicitor on 21 September was misleading and deceptive. The particulars are said to be the whole of the pleading in paragraphs 1 to 23 of the cross-claim and, in addition, five further particulars set out in paragraph 32 as follows: The First Cross Defendant a) misleadingly claimed that he was acting for the Cross Claimants when he was not so acting, which misled the Cross Claimants; b) failed to provide them with a proper opportunity to read the documents and to obtain independent legal and/or financial advice prior to execution of the documents and then misleadingly claimed that the Cross Claimants had told him that they had read and understood the documents when they had not done so; c) witnessing documents stating that each of the Cross Claimants had had the opportunity to obtain independent legal advice and had in fact obtained independent legal advice when he was aware that neither of them could have done so because he was the only lawyer they saw from the time that the documents were presented to them until the time they were executed shortly thereafter. d) misleadingly represented to the Plaintiff that he had explained the nature and effect of the documents to them when he had not done so; e) misleadingly represented to the Plaintiff that the Cross Claimants appeared to be entering into the transaction voluntarily when he had taken no steps to establish whether or not that was the case.
2. There seem to be two aspects to the claim for misleading and deceptive conduct. The first is the now abandoned claim that the solicitor was acting for the plaintiff and misleadingly represented that he was acting for the cross-claimants.
3. The second aspect appears to be a re-expression of the claim in negligence and for breach of retainer by characterising his explanation of the documents as misleading and deceptive because it was not adequate.
4. There is a further problem with the pleading because the documents in relation to the loan agreement were explained at the meeting on 26 September and not 21 September, being the date identified in paragraph 30. However, reading the pleading very broadly, I will infer that the claim for misleading and deceptive conduct includes the meeting of 26 September.
5. In oral submissions, Ms Tibbey asserted that the misleading conduct was that the solicitor allowed the statements of the investors to stand when they said on 21 September that the money would be borrowed for three months, invested and returned, and the cross-claimants would not lose their house. That was not pleaded in the cross-claim. I have accepted the solicitor's account of that meeting, and he does not record that those statements were made.
6. Ultimately, Ms Tibbey accepted that a finding of misleading and deceptive conduct was not going to produce a different result from a finding of negligence. I would put the matter more succinctly by saying that if the solicitor was not negligent he was not guilty of misleading and deceptive conduct.

Causation

1. Although not strictly necessary to do so because I have found no breach on the solicitor's part, I should say something about causation.
2. Causation is to be determined in accordance with s 5D of the Civil Liability Act 2002 (NSW). The first element of the determination is that the negligence was a necessary condition of the occurrence of the harm. In the present case, the evidence satisfies me that any failure on the solicitor's part (assuming that to be proved) was not a necessary condition of the occurrence of the harm because the cross-claimants would have gone ahead with the arrangement in any event. The following matters are significant.
3. First, when the investors came to see Mr Mahmassani after Bilal had told him of the problem, Bilal introduced them as "my friends, they want to help me", and the investors said, "We are his friends, we are trying to help him". Mr Mahmassani asked, "What can we do?" and the investors said that if he mortgaged his house he could give their money back to them. Mr Mahmassani replied, "No, I don't want to pay interest. It is not my problem but I have to save my son." Mr Mahmassani also said that he believed the investors when they told him they would pay the interest and give the money back.
4. When the investors came to see Mrs Mahmassani and asked her to take out a loan, she said to them: I'll get a loan from the bank against the paper of the house. And I'll pay the loan and then they can pay it back to me. She also said that she trusted them because they were her son's friends.
5. Secondly, the cross-claimants had, in 2005 and again in 2008, taken out mortgages with NAB and MDN Mortgages Pty Ltd to assist Bilal buy a house. The NAB mortgage was refinanced with MDN, and the cross-claimants were given money by relatives to repay the MDN mortgage.
6. Thirdly, at the meeting on 26 September, after the solicitor had explained the documents he asked the cross-claimants, "So, would you like to proceed?" Mrs Mahmassani said, "Do you have any children?" The solicitor said, "No". Mrs Mahmassani said, "You wouldn't understand what you will do to help your child." The solicitor then said that the decision was ultimately one for them to make, and Mr Mahmassani said they wanted to proceed.
7. In her oral evidence, Mrs Mahmassani said, when asked about this conversation: A. INTERPRETER: Yes, because I was doing this for the sake of my son, to get him out of this trouble he was in, or this predicament that he's in, but I didn't know that I was the one who was going to become the victim.
8. Mrs Mahmassani also said that she was afraid they would kill her son, and that was why she felt that she should do what was being asked. She said, however, that she believed they would pay the money back. She did not tell the solicitor of her fears in that regard, saying only what is set out at [180] above.
9. Mr Mahmassani also agreed in his oral evidence that he wanted to help his son and agreed that he couldn't go to the mosque because he felt shame for what was happening.
10. Fourthly, on 25 September, the cross-claimants went with the investors to open the bank account in the name of Menara Traders into which the borrowed moneys were to be deposited. Each of Mr Mahmassani and Mr El Chami were the signatories on the account. That is a strong indication that the cross-claimants had already made up their mind that they would do what Bilal and the investors were asking them to do.
11. Fifthly, Mr Mahmassani went with the investors on 28 September 2018 to the CBA at Ermington where the loan monies had been deposited into the Menara Traders account. On that day the investors said they wanted to withdraw the money from that account and put it into Mr El Chami's investment account to make some money. That differed from what Mr Mahmassani had previously been told, which was that they would use $100,000 per month and invest it. Nevertheless, Mr Mahmassani then signed papers to allow the money to be withdrawn from the Menara Traders account and put into Mr El Chami's account.
12. Sixthly, the cross-claimants agreed that they knew that if they did not repay the money the lender would take their house. However, they trusted the investors to repay the money as they had said they would. That Mr Mahmassani was determined to go ahead regardless of what the solicitor said, was somewhat corroborated by an answer he gave concerning reading the guarantor's advice document: Q. Was there any reason why you didn't read the rest of it? A. WITNESS: Because I was - just didn't have - I wasn't concentrating too much. I wasn't taking much seriously thing. I thought just formality, Court formality and just..(not transcribable).. formality. Just paperwork--
13. When dealing with the issue of breach, I recorded the submissions made on behalf of the cross-claimants about what it was said the solicitor should have said or done. I have found that the solicitor provided the advice he was obliged to provide. No submissions were made about what other advice should have been given that would have resulted in the transaction not proceeding.
14. For all of these reasons, even if there was a breach of duty, causation is not established.

Proportionate liability

1. In the light of my conclusions on breach and causation, it is not sensibly possible to apportion liability on the basis that the solicitor was liable to some extent. It is enough to say this.
2. This was a sad and unfortunate case. Bilal must accept a great deal of responsibility for what occurred. He persuaded his parents into this arrangement by deceiving them about the investors, and the likelihood that his parents would ever recover the moneys they were prepared to borrow to give to those investors. Whether, if he had told them the whole truth, including the threats to chop off his fingers, they would have gone ahead in any event, is hard to say. They obviously love their son, did not want him to come to harm, and wanted to help him, as they done in the past by twice mortgaging their house for him.
3. On their own evidence, but because they were deceived, they believed that the investors would do the right thing. So much is clear from the willingness of Mr Mahmassani to let them draw out all of the funds from the Menara Traders account where he had some control. Of course, they were deceived also by the investors who had no intention of repaying any of the money but, again, the cross-claimants were doing it for Bilal.
4. If Bilal's evidence is to be believed, both he and the broker deceived the lender into thinking there was a binding contract of sale for Bilal to purchase the property.
5. None of these people told the solicitor all they knew, and which he needed to know to give fully informed advice. Any advice he gave was limited in terms of what he knew. All of these people, including the cross-claimants would have to bear a proportion of the loss.

Conclusion

1. Accordingly, I make the following orders:
2. The amended cross-claim is dismissed.
3. The cross-claimants are to pay the first and second cross-defendants' costs.

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: 07 July 2021