Teresa Nadia Pedulla v Fernando Rene Panetta & Ors

INDEX Introduction Paragraphs 1 - 14 Claim against Registrar-General Paragraphs 15 - 18 Market Value Paragraphs 19 - 22 No Fault of Plaintiff Paragraphs 23 - 25 Compensable Under an Indemnity Paragraphs 26 - 34 Effect of Statutory Subrogation Paragraphs 35 - 43 Claims against Mr Yee Paragraphs 44 Plaintiff's Claim against Mr Yee Paragraphs 45 - 46 Construction of Section 120(2) Paragraphs 47 - 49 Three Heads of Damage Paragraphs 50 - 53 Registrar-General's Claim against Mr Yee Paragraphs 54 - 55 Negligence - Section 5B Paragraphs 56 Causation - Section 5D Paragraphs 57 - 58 Proportionate Responsibility Paragraphs 59 - 61 Amendment Application Paragraphs 62 - 64 Claim against First and Second Defendants Paragraphs 65 - 66 Interest Paragraphs 67 Conclusion Paragraphs 68 - 69

Introduction 1Between 2004 and 2009 the plaintiff resided with an order of nuns in Catania, Sicily and later in Rossano, Calabria in Italy. While she was behind the cloisters, her brother Fernando fraudulently acquired ownership of her valuable property on Sydney's northern beaches. The property had been purchased by the plaintiff and her late husband in 1978. When her husband died in 1986, the plaintiff became its sole registered proprietor. She never intended to transfer the property to her brother and did not learn that it had occurred until more than four years after Fernando's fraudulent transfer was registered. 2Fernando was assisted by a solicitor, Mr Yee, who is the fourth defendant. Without Mr Yee's involvement, the fraud could not have occurred. In July 2006 Fernando had the first of a number of conversations with Mr Yee about the transfer of the plaintiff's property to him. In the weeks that followed in July and August 2006, Mr Yee took steps to obtain the certificate of title to the property. In a series of communications at that time he stated expressly or by necessary implication that he was acting on behalf of the plaintiff. On 17 August 2006 he wrote to a firm known as Shreuder Partners and falsely stated that he acted on behalf of the plaintiff. In several other communications during August 2006 he falsely described the plaintiff as his client when he knew that she was not. In each of these communications, he deliberately concealed the true facts. 3The true position was that in July and August 2006, Mr Yee did not have any authority from the plaintiff. Nor did he have any reasonable justification for even thinking that he had her authority. Fernando had told him no more than that he wished to have the plaintiff's property transferred to him. He had said nothing to Mr Yee about whether the plaintiff wished to transfer the property to him or whether she wished Mr Yee to act on her behalf. Mr Yee's position at that time could only have been that he knew that the plaintiff was not his client; that he was not authorised by her; and that his statements that he acted for the plaintiff or that she was his client were false. 4One possible, and charitable, explanation of Mr Yee's conduct is that he wrongly assumed that he would in due course be authorised by the plaintiff and that she would become his client at a later date. However, even if that is the case, the fact remains that his statements in July and August 2006 were knowingly false at the time they were made. 5To the extent necessary, I will set out more detailed findings of fact relating to the subsequent events later in this judgment. In summary however, Mr Yee never had any authority from the plaintiff; he obtained the certificate of title; he swore a false statutory declaration; in due course he produced a forged power of attorney and a forged authority from the plaintiff; he caused the power of attorney to be registered; he obtained a valuation of the property for stamp duty purposes; he witnessed Fernando's signature as the purported attorney for the transferor on the transfer; signed the transfer on behalf of Fernando as transferee; and he lodged the transfer for registration. 6The fraudulent transfer in favour of Fernando was registered on 8 March 2007. The consideration was $1. On 12 April 2007, Fernando entered into a loan agreement and mortgaged the property to Westpac Banking Corporation. On the following day he drew down $550,000 from Westpac. A fortnight later, on 27 April 2007, he married Anna Lam (the second defendant) who had, until several years before, been romantically attached to Mr Yee. On 2 May 2007, he caused Anna Lam to become a joint registered proprietor of the property. 7Events then spiralled. In 2009 Fernando and Anna borrowed a further $1.5 million on the security of the property. The mortgage to Westpac was discharged and a fresh mortgage over the property granted to the Permanent Trustee Company. In May 2010 they borrowed further monies from a company called Cashflow Advantage Pty Ltd and granted a second unregistered mortgage over the property to it. In July 2010, they entered into a further loan and guarantee agreement with Provident Capital. The loan amount was $1.99 million secured by a mortgage over the property. The mortgage to the Permanent Trustee Company was duly discharged and a fresh mortgage given to Provident Capital. 8In November 2010, Fernando travelled to Sicily to be with the plaintiff and their father. Mr Panetta was gravely ill and died on 28 December 2010. After the death, Fernando remained in Italy. In the meantime Fernando's wife, Anna, who was in Sydney, took steps to sell the property. She had discussions with Mr Yee, who assisted her and acted on behalf of both Anna and Fernando as vendors of the property. At the last minute Mr Yee withdrew and recommended that a Mr Lau act on their behalf. Mr Lau's involvement was brief and Mr Yee personally paid his fees. Mr Yee arranged for a third solicitor. On 8 February 2011 a contract for sale of the property was signed by Anna pending receipt of a power of attorney from Fernando who was still in Italy. On the following day, 9 February, she travelled to Italy. The contract price was $3.8 million. The business was all but done. Contracts were subsequently exchanged on 11 March 2011. 9The plaintiff knew none of this. She had no reason to think that she had ceased to be the registered proprietor of her property, let alone that Fernando and Anna had agreed to sell it. She had not met Anna. She did not know who Mr Yee was. She had left the religious order in June 2009 to care for her father. She had not been back to Australia. She was isolated, penniless and dependent on her sister who provided her with limited financial assistance from her father's pension. While Fernando was with the plaintiff in Sicily he kept quiet. Anna arrived on 11 February 2011 but she said nothing. 10The truth emerged unheralded on or shortly before 14 April 2011. Fernando said to the plaintiff that she no longer had a house. The plaintiff was naturally anxious but Fernando refused to explain what he meant or to answer her questions. She tried to contact the one person known to her in Australia whom she thought might possibly be able to assist her. His name was Christopher Miles. She and Mr Miles had been part-time students together at the University of Technology in Sydney in 1989. She knew that he had gone on to complete the LPAB course. She believed that he was a lawyer. When she knew him, Mr Miles lived with his mother. Hers was the only telephone number the plaintiff had. There had only been one contact between the plaintiff and Mr Miles since 2002. That was in 2004. 11The plaintiff contacted Mr Miles' mother, who passed the message on to Mr Miles. He generously agreed to assist - as far as he could. There was some initial difficulty in getting through to the plaintiff and a suggestion in the evidence that Fernando was accessing her emails and had changed her password. However Mr Miles carried out a search of the title to the property and was able to inform the plaintiff of the basic facts. 12Mr Miles told the plaintiff that he had bad news. He said that "It is not that your brother is planning to do something, he has already done it. The property is out of your name and into the names of [Fernando and Anna]". Mr Miles recommended that the plaintiff come back to Sydney. But she had no money for an airfare. He suggested that a caveat be put on the title, although he had no reason to think that there was any immediate threat. He knew nothing of the sale transaction entered into by Fernando and Anna on 11 March 2011. When the plaintiff asked if Mr Miles could place a caveat on the title, he replied: Mr Miles: I think you need an affidavit and other forms to be filled out by a solicitor formally acting for you. I can't be your lawyer. I have a restricted practising certificate. I can only act for the Department of Education. You need to be here. You can't do it from Italy. Look at how difficult it has been for us to communicate with emails and time differences. You need to get your own solicitor to represent you. Mrs Pedulla: Can I get a lawyer on legal aid? Mr Miles: Probably not... 13Nothing was done. The plaintiff was confused and distraught. Her Australian passport had expired. She did not wish to confront Fernando or make him suspicious. She had no money. She spoke to her sister about a loan to enable her to return to Australia. Easter was an important religious and family time, especially for the plaintiff. The family, including the duplicitous Fernando, stayed together in Sicily. After Easter, the position became irretrievable. On 27 April, the first working day after Easter, or possibly on 29 April, settlement of the sale transaction occurred. On 2 May 2011, the transfer of the property to new owners was registered. On the same day, Anna returned to Sydney and Fernando soon followed. On 4 May, the plaintiff arranged to return to Australia and arrived on 13 May 2011. 14From the net proceeds of sale of the property, Fernando and Anna each received $684,890.92. On 25 May 2011 they left Australia on separate flights and have not been seen since. Mr Yee contended that he had no knowledge of the whereabouts of either Fernando or Anna. Nonetheless he remained in contact with Anna after her departure at least by email.

Claim against Registrar-General 15These are the sorry circumstances in which the plaintiff brings a claim for payment of compensation from the Torrens Assurance Fund (Assurance Fund) pursuant to Section 129(1) of the Real Property Act (RPA) . She has suffered loss as a result of the operation of the Act in circumstances where, among other things, the loss arises from her "having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud": Section 129(1)(e). 16There are three relevant limitations on the plaintiff's entitlement to compensation. Each is in issue in this case. First, the total compensation payable is limited to "the market value of the land at the date on which compensation is awarded" plus any legal, valuation or other professional costs reasonably incurred in making the claim: Section 129A. I was informed that the amount of the plaintiff's legal, valuation or other professional costs is likely to be agreed or resolved after I have made my principal findings. 17Second, compensation is not payable in relation to any loss or damage suffered by the plaintiff to the extent that her loss or damage is a consequence of any act or omission by her: Section 129(2)(a). If these words were applied literally, they could drastically reduce the entitlement of a claimant to compensation. This is not the way in which I should construe and apply the language of Section 129(2)(a). I adopt the analysis of Bryson J in Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 at [11]: The reference must be limited to any act or omission which is in some way a fault, a failure or is otherwise a shortcoming in a way which makes it an appropriate ground for limiting the extent of compensation. In some way this is fault-related. See also Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694 at [52]. 18Third, compensation is not payable in relation to any loss or damage to the extent to which the loss or damage is a consequence of any fraudulent, wilful or negligent act or omission by any solicitor and "is compensable under an indemnity given by a professional indemnity insurer": Section 129(2)(b).

Market Value 19I will deal first with the quantum of the plaintiff's statutory loss under Section 129A and then turn to the defences under Section 129(2). The only issue for determination under Section 129A is the market value of the land at the date on which I award compensation. Market value is a well known and well understood concept. It means the amount that is determined "by an enquiry into what a willing purchaser will pay and a not unwilling vendor will receive for the subject matter being valued": Airservices Australia v Canadian Airlines International Limited (1999) 202 CLR 133 at [444] (Gummow J); Spencer v The Commonwealth (1907) 5 CLR 418 at 431-2; Holt v Cox (1994) 15 ACSR 313 at 334 (Santow J). The premise of the enquiry is that an efficient market exists. It was not suggested in this case that I should proceed on some other premise. 20The evidence of value is all one way. It points inexorably to the likelihood that the actual sale price of $3.8 million agreed in March 2011 is the best indicator of the current market value. Although the Registrar-General put a tentative and speculative submission that the purchasers from Fernando and Anna had agreed to pay above market value, there was no factual foundation that could justify any such inference and no sound evidence, let alone expert valuation evidence, to support any lower figure. The price of $3.8 million was, in my view, freely agreed between not unwilling vendors and willing purchasers. Nor was there any evidence of market fluctuation between March and November 2011. There is simply no evidentiary reason to depart from $3.8 million as a touchstone of current market value. 21It matters not that prior to the sale, Anna and Fernando obtained a number of assessments of value, varying in formality, that suggested that an indicative range was somewhat less than $3.8 million. The difference was not great in any event. And most of the assessments substantially pre-dated the sale in question. For example on 24 April 2010, Raine & Horne, Dee Why provided an appraisal which assessed the value of the property in the range $3 million to $3.5 million. In 2011 the purchasers initially offered to pay $3.4 million before increasing their offer to $3.8 million. 22The fact that the purchasers ultimately agreed to pay a sum higher than their previous offer is no more than an example of an efficient market working in the way it is expected to operate. The outcome, according to conventional market theory, the daily staple of economists, is the market value. I am therefore satisfied that the current market value of the land for the purpose of Section 129A is $3.8 million.

No Fault of Plaintiff 23As to the defence under Section 129(2)(a), I am not satisfied that the plaintiff's loss or damage is a consequence of any act or omission by her in the sense which I have explained in paragraph [17] above. The Registrar-General embraced the construction of Section 129(2)(a) which Bryson J twice promulgated in the Chandra decisions (supra) and did not ask me to depart from it. Nor did the Registrar-General challenge the plaintiff or cross examine her on most of her evidence that was designed to rebut this defence. In fact, the Registrar-General's submissions in support of this defence were put but lightly. 24Apart from the matters set out in paragraphs [9] - [13] above, the plaintiff explained that she had no reason to think that Fernando and Anna intended to sell the property. Fernando and Anna were actually with her in Italy. Fernando had been present since November 2010. It was logical and reasonable for the plaintiff to think that they would not, or could not, take any further steps in relation to her property while they were in Italy. Mr Miles could not assist her. She had no money and could not instruct another lawyer. She did not wish to act precipitously and alert Fernando. She had no expectation that Fernando and Anna would sell the property. She laboured under the misapprehension that she needed to re-new her Australian passport. 25In all of the circumstances, the plaintiff's conduct in failing to lodge a caveat prior to 2 May 2011 was explicable on reasonable grounds. It is excusable. It does not represent fault on her part. It was not a failure by her to take reasonable care to safeguard her own interests. It does not constitute conduct of the type with which Section 129(2)(a) is concerned.

Compensable Under an Indemnity 26The third issue is the Registrar-General's defence under Section 129(2)(b). It turns, in substance, on the likely application of the dishonesty exclusion in Mr Yee's professional indemnity policy. In considering this question, I should have regard to the facts proved at the hearing before me and the inferences against Mr Yee that are available to be drawn from those facts. The burden, of course, is with the Registrar-General. And it is not a light task, for "it involves proving facts which show the absence of any ground upon which the insurer could effectively deny liability under the policy": Chandra v Perpetual Trustees Victoria Ltd [2007] (supra) at [64] per Bryson J. 27Mr Yee's professional indemnity policy contains an exclusion in the following terms: 27 We will not indemnify an insured under this policy when the claim arises, whether directly or indirectly, from any dishonest or fraudulent act or omission of that insured. 28The meaning and effect of an earlier version of that exclusion was considered in McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579. More recent illustrations of the scope and application of other variations of this well-known exclusion can be found in Yaktine v Perpetual Trustees Victoria Ltd [2004] NSWSC 1078, Ginelle Finance Pty Limited v Diakakis [2007] NSWSC 60 and Vaccaro v Flammia [2008] NSWSC 1322. The version of the exclusion in issue in this case is more favourable to an insurer than earlier versions but whatever version is in issue they all depend on the existence of some causally relevant dishonest act or omission by the insured. The words "or fraudulent" add nothing. Fraudulent conduct is necessarily dishonest. And of course, the expression "arises from" is an expression of wide import, to which the qualification "whether directly or indirectly" adds an even broader causal dimension. 29Dishonest conduct by solicitors usually involves conscious impropriety in the sense of an act, omission or statement that the solicitor knows is false or misleading. It is not necessary that there be an intention to profit personally from the dishonest act. Nor is it necessary that the dishonest act or omission deprive another of money or valuable property. It is difficult to go past Lord Nicholls' masterful description of dishonesty in Royal Brunei Airlines SDN. BHD. v Philip Tan Kok Ming [1995] 2 AC 378 at 389: ...acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour. See also Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 579-580 (Brennan, Deane, Gaudron and McHugh JJ) 30For the reasons that I have explained, it is not in fact necessary for me to make a finding in this case that Mr Yee's conduct was dishonest within the meaning of the exclusion or that the insurer is entitled to deny indemnity because of the application of that exclusion. I need only decide whether the Registrar-General has met the burden of establishing the defence under Section 129(2)(b). He has not done so. 31Mr Yee was a most unimpressive witness - both as to the manner in which he responded to questions in cross-examination and, more significantly, in the content of his oral and written evidence. It is not necessary for me to go as far as a judge hearing a disputed claim for indemnity under Mr Yee's policy would be required to go. The issue for my determination under Section 129(2)(b)(ii) is different. That issue is whether the Registrar-General has demonstrated that it is more likely than not that the loss "is compensable under an indemnity given by a professional indemnity insurer". 32I have taken into account, among others, the following findings of fact concerning Mr Yee's conduct: (a) Mr Yee had a long-term business, domestic and intimate relationship with Anna to whom he felt an obligation. That sense of obligation arose, among other things, from her saving him from bankruptcy. (b) The property was transferred to Fernando's name and in rapid succession, Fernando married Anna, the property was transferred to their joint names and then mortgaged on a number of occasions before finally being sold. (c) Mr Yee assisted and facilitated the transactions by which the property was transferred and mortgaged while at all times feeling a sense of obligation to Anna and indirectly to her new partner Fernando. (d) Fernando had neither actual nor ostensible authority to retain Mr Yee on behalf of the plaintiff. Nor did he profess to do so. The conversation by which Mr Yee claimed that the plaintiff became his client was palpably inadequate for that purpose and Mr Yee knew that. (e) Even if the forged power of attorney had been genuine, it did not permit the transfer of the property to Fernando. Any prudent solicitor would have wanted direct communication with the plaintiff. Mr Yee made no attempts to satisfy himself that the plaintiff knew that a transfer of her property for nominal consideration was proposed. (f) The certificate of title and other documentation that enabled the fraudulent transaction to be effected were procured as a result of a series of false statements made by Mr Yee. They included his communications to Schreuder Partners dated 17 and 22 August 2006 and his statutory declaration sworn 17 November 2006. In each of those documents Mr Yee claimed that the plaintiff was his client. (g) The reality was that Mr Yee wanted to assist Fernando and because he wanted to assist him he was prepared to make a false statement about acting for the plaintiff. (h) In his statutory declaration Mr Yee falsely claimed to be the solicitor for the plaintiff, falsely claimed that his client had produced a letter from B J Berriman & Co and falsely claimed that his client had located a copy of the discharge of mortgage. (i) Mr Yee's claims that he trusted Fernando or that Fernando was his friend do not make his conduct any less dishonest. They do not absolve him. He knew of the falsity of his statements. (j) The forged power of attorney (which did not in fact authorise the transfer of the property to Fernando) was not in any event received until shortly before 9 February 2007. This was over 6 months after Mr Yee first purported to act for the plaintiff. 33Those facts amply support the conclusion I have reached. But there were further unsatisfactory features of Mr Yee's conduct in connection with the conduct of these proceedings that caused me concern. They reflect on his credit and bolster my primary findings. They constitute further support for my conclusion that the Registrar-General has failed to make out the defence under Section 129(2)(b) of the RPA. Those features included: (a) Mr Yee failed to properly answer the plaintiff's subpoena dated 30 May 2011. The subpoena called for certain emails and communications. Mr Yee understood what emails were required to be produced pursuant to the subpoena. However he deleted emails sent by Anna on 30 and 31 May 2011 in accordance with what he claimed was his "normal procedure". I do not think that he made an honest attempt to answer the subpoena. (b) The plaintiff's solicitors pursued Mr Yee about his inadequate response to the subpoena. Mr Yee made false statements in his response including assertions about having no emails and not using email at the time. He had in fact received the two emails from Anna after the freezing orders were made and after she had left Australia. I reject his claims that he did not think about whether he had to produce them. (c) Mr Yee deleted the emails sent by Anna on 30 and 31 May 2011, and did not produce them notwithstanding having received them within a day of being served with the subpoena by the plaintiff's solicitor. I reject his claims that this was an oversight. (d) Mr Yee was ordered to inform the plaintiff's solicitor of the address and details of Fernando and Anna including their last known email addresses. He falsely stated that the email address for Anna was the "julyhotmail" address when in fact he had communicated with her at another address known as the "mayoctoberhotmail" address on 30 and 31 May 2011. He did not correct that false statement and concealed that email address from the plaintiff's solicitor. (e) The court's orders of 20 May 2011 provided for substituted service on Fernando and Anna upon Mr Yee. Those orders were served upon Mr Yee on 20 May 2011. Mr Yee claimed that he tried to send the freezing orders, originating process and affidavits to Anna but received email bounce-backs on the "julyhotmail" address. He claimed to have been receiving bounce-backs from that email address since about 21 May. In fact that email address was still operating. (f) Mr Yee claimed that he did not get his computer until approximately 2008 and he did not have email up until that time. In fact he had communicated with Fernando and Anna in 2005 and 2006, by both work and private email. (g) Mr Yee's explanations for his failing to continue to act for Fernando and Anna on the sale of the property were implausible. I reject the claim that he was too busy. He had time to draft and amend Anna's emails to be sent to the new solicitors. There was no significant time commitment left. The contracts were ready for exchange. He was copied in on the email communications relating to the sale. It was Mr Yee to whom the keys and a power of attorney were sent rather than to the solicitors formally acting for Fernando and Anna on the sale. 34For those reasons, I am quite satisfied that the Registrar-General has not established that it is more probable than not that the loss is compensable under Mr Yee's professional indemnity policy. The findings of fact that I have made suggest that the opposite conclusion is more probable.

Effect of Statutory Subrogation 35In addition to an award of compensation from the Assurance Fund, the plaintiff seeks judgment for a similar, indeed greater, amount against Mr Yee. This she cannot do, at least as to the bulk of her claim. This is a necessary consequence of the statutory subrogation that takes effect pursuant to Section 133 of the RPA . Section 133(2) and (4) provide as follows: (1) ... (2) If administrative proceedings or court proceedings are commenced in relation to a claimant's compensable loss, the Registrar-General is subrogated to the claimant in respect of the claimant's rights and remedies against any person in relation to that loss. (3) ... (4) The Registrar-General may join any person in any court proceedings if of the opinion that the claimant has a cause of action against that person in respect of the compensable loss to which the proceedings relate. 36As a matter of conventional analysis, subrogation is a remedy against a party who would otherwise be unjustly enriched. It applies according to well settled principles and in defined circumstances. It is a means by which a third party such as a principal debtor or other obligor is prevented from being unjustly enriched by escaping carriage of ultimate liability: Bofinger v Kingsway Group Limited (2009) 239 CLR 269 at [88] - [98]; Boscawen v Bajwa [1996] 1 WLR 328 at 335 (Millett LJ). The fact that this case concerns a statutory subrogation, rather than a subrogation under the general law, does not, in my opinion, change the underlying rationale underpinning the remedy. 37Section 133(2) provides that the Registrar-General "is subrogated to the claimant in respect of the claimant's rights and remedies against any person in relation to that loss". The subrogation contemplated by Section 133(2) is a hybrid containing some features that differ from subrogation under the general law. I explain those features in paragraphs [40] - [44] below. However I do not think there is any basis, as a matter of construction, for concluding that the underlying rationale of the statutory remedy is different to that which applies to subrogation under the general law. 38In particular, it is implicit in any form of subrogation that there is only one claim which, upon subrogation, becomes a right or remedy available to be pursued by the surety. Subrogate is a word of Latin derivation that means to substitute or put in another's place. It would be a contradiction in terms if subrogation were invoked to enable the simultaneous pursuit of a right or remedy against a third party by both the surety and the original party in whose favour it arose. Such an outcome would be oppressive. It would also be heterodox because, as I have said, there are not two claims but only one, and the one claim cannot be pursued by two different parties - at least without crossing metaphysical boundaries. 39In this case, once the plaintiff has recovered her compensable loss from the Assurance Fund consisting of the current market value of the land and associated professional costs, she cannot obtain judgment against Mr Yee for the same amount. Her common law rights and remedies to recover that amount from Mr Yee cease to be exercisable by her and are only exercisable by the Registrar-General pursuant to Section 133(2). The obligation to disgorge under Section 133A does not detract from this analysis. It applies where for some reason the Registrar-General has not exercised his right of subrogation or the claimant has received a payment on account of compensable loss from another person. It is, in my opinion, a failsafe. Ordinarily, it is unlikely to arise. 40There are however some material features of the statutory subrogation under Section 133(2) that require explanation. First, the Registrar-General is subrogated to the plaintiff's rights and remedies upon the commencement of administrative or court proceedings, He need not wait until an award of compensation from the Assurance Fund is made or payment is effected. However under the general law an insurer, to take one example, does not obtain the right to bring subrogated proceedings in the insured's name until after the insured has been fully indemnified: A.F.G.Insurances Ltd v City of Brighton (1972) 126 CLR 655 at 663 (Mason J); Mitchell & Watterson, Subrogation Law and Practice , 2007, Oxford University Press at 326. 41Second, the Registrar-General is only subrogated in respect of the plaintiff's rights and remedies against Mr Yee in relation to her "compensable loss". The compensable loss is defined by Section 128 and determined by the application of Sections 129(1) and (2) and 129A. Its practical effect is that the most that the plaintiff can recover from the Assurance Fund is the market value of the land at the date on which compensation is awarded together with associated professional costs. The effect is that the plaintiff remains free to pursue against Mr Yee other heads of damage which do not constitute compensable loss. This is consistent with principle. For example, an insurer is not entitled to exercise a right of the insured which is not connected with the subject matter of the insurance: Transport Accident Commission v C.M.T. Construction of Metropolitan Tunnels (1988) 165 CLR 436 at 441-2. It goes without saying that if property is insured against fire and a third party is responsible for an insured loss in which the insured happens to suffer personal injury, the insurer is subrogated to the rights of the insured against the third party in respect of the loss to the property, but not in respect of his or her personal injury. 42Third, a consequence of restricting the Registrar-General's statutory right of subrogation to the plaintiff's rights and remedies in respect of compensable loss is that, if either of the defences under Section 129(2) is established, the Registrar-General's subrogated right of recovery from Mr Yee will be commensurately reduced. Understandably, there is intended to be an equivalence between the amount of compensable loss which the plaintiff recovers from the Assurance Fund and the amount which the Registrar-General is entitled to recover from Mr Yee pursuant to its statutory right of subrogation. 43Finally, I should observe that while a surety exercising a right of subrogation under the general law sues in the name of the indemnified party, I do not think that such formality is necessarily required when the Registrar-General exercises his right of subrogation pursuant to Section 133(2). Even if I am wrong, this is only a matter of form not of substance and there could be no prejudice or confusion. That is because the Registrar-General's only entitlement to sue in circumstances such as these is pursuant to his statutory right. Under the general law, the point of a surety suing in the name of the indemnified party is that he is exercising the latter's rights and remedies to which he is substituted, not a right or remedy to which he is otherwise personally entitled. But that is implicit when the Registrar-General exercises his statutory right pursuant to Section 133(2). Additionally, it is convenient that the Registrar-General sue in his own name. To do otherwise would be cumbersome and confusing in circumstances where the legislature contemplated that there might be, as there are in these proceedings, claims by the plaintiff against the Registrar-General and against the wrongdoer, as well as a claim by the Registrar-General against the wrongdoer.

Claims against Mr Yee 44As I have made clear, the plaintiff is entitled to succeed in her primary claim against the Assurance Fund for the sum of $3.8 million plus legal, valuation or other professional costs as agreed or assessed. That leaves the following claims against Mr Yee: (a) The plaintiff retains her rights and remedies against Mr Yee insofar as they do not seek compensable loss and are not therefore the subject of the statutory subrogation in favour of the Registrar-General. She is entitled to pursue the other heads of damage that she says she has suffered as a result of his breach of duty. (b) The Registrar-General is subrogated, pursuant to Section 133(2), to the plaintiff's rights and remedies against Mr Yee in respect of her compensable loss, namely $3.8 million and associated professional costs. For the reasons that follow, the Registrar-General is entitled to judgment against Mr Yee in respect of that sum subject to any appropriate apportionment among concurrent wrongdoers and to the extent permitted by the Professional Standards Act 1994 .

Plaintiff ' s Claim against Mr Yee 45I will deal first with the plaintiff's entitlement to recover against Mr Yee. Her cause of action is for damages for negligence. As I have explained, this claim is residual, consisting only of her remedies to recover loss and damage which do not constitute compensable loss and are therefore not the subject of subrogation in favour of the Registrar-General. This confines her to three heads of alleged loss and damage that stand outside the current market value of the land and the associated costs to which she is entitled pursuant to Section 129A. I have set out in paragraphs [56] - [61] my findings in relation to breach, causation and proportionate responsibility under the Civil Liability Act 2002 (CLA). Duty was admitted. 46The three heads which the plaintiff claims, subject to appropriate apportionment, are as follows: (a) $100,000 being an estimate of the value of the loss which she has supposedly suffered because the property was acquired before 1985 and therefore not liable for capital gains tax. (b) $210,199 being the stamp duty and other costs which she would incur if she chose to purchase an equivalent property. (c) A sum to reflect the cost of rental accommodation which she has incurred and will continue to incur until a new home is located and purchased and the current lease terminated.

Construction of Section 120(2) 47There is a threshold issue however as to whether the plaintiff is entitled to recover any of these sums because, it was submitted, all of her common law rights are extinguished by Section 120 of the RPA. I explained in paragraphs [38] - [39] above the way in which the exercise by the Registrar-General of the right of statutory subrogation pursuant to Section 133(2) prevents the plaintiff from pursuing a claim against Mr Yee for the compensable loss to which she is entitled from the Assurance Fund. Only the Registrar-General, exercising his right of subrogation, can pursue Mr Yee for that loss and damage. 48However, Mr Yee's submissions go further. He contends that the plaintiff has lost all of her common law rights, including her rights to non-compensable loss, by reason of the operation of Section 120. His submissions depend on the meaning of the deceptively simple conjunction "or" where it appears between paragraphs (a) and (b) in Section 120(2). Section 120(1) provides that a person such as the plaintiff who has suffered loss and damage of the specified type may commence proceedings in the Supreme Court for the recovery of damages. Section 120(2) then provides as follows: (2) Such proceedings may be taken only: (a) against the person whose acts or omissions have given rise to the loss or damage referred to in subsection (1), or (b) against the Registrar-General. 49I have no hesitation in rejecting this submission for the following reasons: (a) First, having regard to the linguistic context and syntax, the word "or" which links paragraphs (a) and (b), is employed as a grammatical conjunctive, not as a disjunctive. Section 120(2) limits a claimant to suing only two classes of litigant, the wrongdoer(s) and the Registrar-General. If the conjunction "and" had been used, this would have required a claimant to sue both the wrongdoer and the Registrar-General when the claimant may have wished only to sue the Registrar-General. There may be many reasons why a claimant may not wish to sue the wrongdoer. (b) Second, if one deploys the same grammatical device in another context, the appropriate interpretation becomes clear. If the instructions on a bottle of medicine say "This medicine can only be consumed with water or milk" their meaning is to limit the consumer to water or milk to the exclusion of anything else. The instructions do not prevent the consumer from using both if he or she wishes. Likewise a claimant such as the plaintiff is entitled to sue both the wrongdoer and the Registrar-General. (c) Third, it is an axiom of statutory construction that if a statute intends to exclude a party from pursuing common law rights the restriction must be expressed in clear and emphatic terms: Potter v Minahan (1908) 7 CLR 277 at 304 (O'Connor J); Thompson v Australian Capital Television Pty Ltd (1994) 54 FCR 513 at 526 (Burchett and Ryan JJ). This has not been done, not faintly, not even with the merest suggestion. (d) Fourth, the Minister's Second Reading Speech makes abundantly clear that the legislative purpose of subsection (2) is to limit a claimant to claims against the Registrar-General and the wrongdoer, not to force a claimant to make an election between the Registrar-General and the wrongdoer. The legislative objective was to prevent additional claims against the State of New South Wales.

Three Heads of Damage 50It therefore follows that the plaintiff is entitled to pursue all three heads of damage against Mr Yee. Two of those heads of damage raise questions that require consideration. The third head, the claim for rent, is straightforward and is not seriously disputed. The plaintiff should recover an appropriate amount for this head. I regard a period of six months after judgment as a reasonable period which should be allowed to the plaintiff for the purpose of locating and purchasing another property and terminating her current lease. The parties should agree on an appropriate figure at the rate of $200 per week. 51The claim for $100,000 representing a supposed capital gains tax loss is creative but too ambitious. It is, in my view, too remote. There are too many contingencies that would have to be satisfied before it could be said that any loss of this nature is likely to be suffered. Capital gains tax is not payable on the sale of property that constitutes the residential home, whether the property was acquired before or after 1985. The plaintiff would only incur a capital gains tax liability if she purchased a replacement property, if she then chose to use it for investment purposes or otherwise than as her residence, and if she subsequently chose to sell the property in her lifetime. There was no sound evidence from which I could draw an inference as to the likelihood of all of these events taking place or the amount of capital gains tax that might be payable by her if those contingencies crystallised. Even if there were some evidence, it would be far too problematic and hypothetical. As a matter of principle, I am far from satisfied that a latent benefit of this nature could ever amount to recoverable loss. There are too many contingencies. For example, if the plaintiff does acquire a replacement property, retains it and merely devises it upon her death in accordance with the terms of her will, there will be no capital gains tax liability incurred by her estate - whether the property had been used as her residence or for investment purposes. In those circumstances, an award of damages under this head would be a windfall. All things considered, the capital gains tax benefit which the plaintiff seeks to recover is too chimerical and uncertain. There are no reasonable quantifiable probabilities to support this head of damage, merely speculation, and no proper basis for awarding damages in respect of it. 52The claim for stamp duty and other costs associated with the purchase of a replacement property has a more orthodox basis. The object of an award of damages in tort is to restore the plaintiff to the position in which she would have been if the wrongful act had not been committed: Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 13; Parramatta City Council v Lutz (1988) 12 NSWLR 293 at 311 (CA). In accordance with that overarching principle, the wrongdoer is liable for all of the foreseeable loss and damage flowing directly from his wrongful act or omission: State of South Australia v Johnson (1982) 42 ALR 161 at 170. It is foreseeable that in the purchase of a replacement property the plaintiff will incur stamp duty and associated costs. That is an expense that she would not have needed to incur if she retained her existing property. It is reasonable that the plaintiff be entitled to recover this head of damage calculated by reference to an equivalent purchase price outlaid for the replacement property. 53I should add as a postscript that the submissions on behalf of Mr Yee not only opposed an award of stamp duty but included the bizarre proposition that, assuming the plaintiff were entitled to recover damages from Mr Yee for the monetary value of her property, she should be limited to the "net proceeds of sale". This submission was unfathomable. Its practical effect was said to be that rather than the amount represented by the current market value of the property, the plaintiff should only receive an amount that represents the estimated net proceeds of sale upon a hypothetical sale. It was not clear to me why I should even be considering a hypothetical sale. But the effect of the submission was that it was necessary to deduct from the current market value amounts representing the following items - real estate commission, advertising and auction costs, legal fees and "whatever expenses were necessary to bring the property to a fair state for inspection". For the reasons I have already explained this issue does not arise on the plaintiff's claim against Mr Yee. But in case it be thought that the submission has any credence, I make clear that I reject it.

Registrar -General' s Claim against Mr Yee 54That leaves the Registrar-General's claim against Mr Yee. His entitlement rises no higher than the plaintiff's rights and remedies against Mr Yee in respect of the compensable loss. It must be viewed, like all actions brought pursuant to a right of subrogation, through the prism of the original claimant, namely the plaintiff. Mr Yee's duty of care to the plaintiff was admitted. The issues that remain are whether he has breached his duty, whether his breach caused the plaintiff's loss and whether his liability should be reduced because of the proportionate responsibility of concurrent wrongdoers. The resolution of these matters is governed by the CLA. 55The issue as to whether Mr Yee was negligent must be determined by reference to the criteria set out in Section 5B. The issue as to whether that negligence, if found, caused the plaintiff's loss must be determined by reference to the matters stated in Section 5D. The issue of the extent to which Mr Yee's liability should be limited to reflect his proportionate responsibility must be determined by reference to the terms of Section 35(1). I will deal with each of these issues in turn and will include in connection with the third issue, a summary of my reasons for refusing a late application by Mr Yee to plead that the Registrar-General was a concurrent wrongdoer.

Negligence - Section 5B 56I have already explained Mr Yee's conduct and the reasons why the Registrar-General has failed to prove that the loss arising from that conduct is compensable under Mr Yee's policy of professional indemnity. Given the findings that I have set out in paragraphs [2]-[5] and [32] above, there is no doubt that Mr Yee was negligent within the meaning of Section 5B. The description of Mr Yee's conduct during submissions ranged from "extreme" to "egregious". Both are apposite to describe Mr Yee's wrongful conduct. To put it rather more neutrally, he failed to take the precautions that a reasonable solicitor in his position would have taken.

Causation - Section 5D 57I am satisfied that Mr Yee's negligence was a necessary condition of the occurrence of the plaintiff's loss. I am also satisfied that it is appropriate for the scope of Mr Yee's liability to extend to the loss suffered by the plaintiff. Mr Yee's conduct in facilitating the fraudulent transactions was an operative cause of the loss. This was not simply a case of failing to verify instructions. In the circumstances, without any communication from the plaintiff, and faced with a transfer of valuable property for nominal consideration, there was no justification for Mr Yee proceeding as he did. This is notwithstanding the forged power of attorney and authority. They cried out for verification directly from the plaintiff. In the absence of her verification Mr Yee should have refused to act. A fraud such as that perpetrated by Fernando is the very type of conduct that prudent and reasonable solicitors, acting diligently, are alert to prevent in circumstances such as these. Mr Yee was never justified in acting in accordance with that which Fernando asked him to do. 58This is not a case of deliberate and fraudulent conduct by Fernando and Anna merely taking advantage of Mr Yee's honest negligence. Mr Yee's conduct was not mere carelessness. It was qualitatively different. It did not merely set the scene for a deliberate wrongful act. It was an integral part of it. His conduct was not a mere antecedent, albeit necessary, pre-condition to the fraud. It was central and causative. The fraud by Fernando and Anna did not sever the chain of causation. It was part of a continuum that Mr Yee set in play when he obtained the certificate of title by falsely representing that he was the plaintiff's solicitor: cf Mallesons Stephen Jaques v Trenorth [1999] 1 VR 727 at [19]-[25] (Kenny JA).

Proportionate Responsibility 59Mr Yee's liability must be limited to reflect his proportionate responsibility. Fernando and Anna, the first and second defendants, are clearly concurrent wrongdoers. The claim against Mr Yee is an apportionable claim. It is necessary to compare the culpability of Mr Yee on the one hand with that of Fernando and Anna on the other hand. I must look at the blameworthiness and causative potency of the conduct of each of them. This involves considering, among other things, who among the wrongdoers was more actively engaged in the activity that caused loss; and who was more effectively able to prevent the loss: Kayteal Pty Ltd v Dignan [2011] NSWSC 197; Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463. 60The Registrar-General submitted that 70% of the loss should be apportioned to Mr Yee. The plaintiff submitted that 50% was reasonable. Mr Yee submitted that his proportionate responsibility was only in the range of 10-15%. In approaching the issue of apportionment, I do not think that it is appropriate to treat Fernando and Anna collectively. They may have profited equally and may have been engaged in a joint endeavour, but each was a wrongdoer in his or her own right and each took certain steps individually to perpetuate the fraud. 61On that basis and having regard to the findings of fact that I have made concerning Mr Yee's conduct, I have reached the conclusion that his appropriate proportionate responsibility is 30% and that of Fernando and Anna 35% each. Although in one sense the conduct and motives of Fernando and Anna were of a higher order than that of Mr Yee, I have found that Mr Yee made knowingly false statements and took steps to obtain the certificate of title to the property in circumstances that reflect on his probity. To describe his conduct as merely facilitative is to understate it. I do not regard him as an innocent dupe of whom Fernando and Anna took advantage. What is more, he was at all relevant times able effectively to prevent the loss. His professional duty obliged him to do so. Fernando and Anna could not have succeeded in their brazen and fraudulent conduct if Mr Yee had acted in accordance with the standards of propriety and sound practice which he was bound to follow. I repeat what I have already said in relation to the causative effect of Mr Yee's conduct. If he had acted reasonably and prudently, and especially if he had acted honestly, the attempted fraud would have been exposed and the initial transfer to Fernando would never have occurred.

Amendment Application 62The issue of apportionment was raised on Mr Yee's behalf even before the hearing commenced. On 4 November 2011 I dismissed an application by Mr Yee to amend his defence to include an allegation that the Registrar-General was also a concurrent wrongdoer. The object of the allegation, if proved, was to achieve a further apportionment of responsibility for the plaintiff's loss - if I were otherwise satisfied that judgment should be given against Mr Yee. During argument, I made clear that there were numerous discretionary reasons why I intended to dismiss the application. Among other things, the application was too late; the hearing would have been vacated; the plaintiff would have been prejudiced; and the issue raised would have required the Registrar-General to give consideration to whether it should adduce factual and expert evidence. I formed the view that the legal representatives of Mr Yee had only themselves to blame. They had not acted with the despatch that proceedings in the Expedition List required, including by the timely briefing of counsel, the prompt obtaining of advice from him and by applying to amend earlier than they did. This was all the more important given that a hearing date had already been fixed when Mr Yee was joined. In addition, there were two other matters that concerned me. First, the form of the proposed pleaded against the Registrar-General was wholly inadequate to enable the Registrar-General to fairly consider his position and respond. Second, the alleged cause of action against the Registrar-General seemed to me to be of dubious validity. 63On the second day of the hearing, I generously permitted Mr Yee to renew his application with a properly pleaded allegation. That did not however remove my concerns about the prejudice, the delay and the unfairness to the other parties. Furthermore, it became even clearer that the cause of action underpinning the proposed amendment was so problematic, and so attended by doubt as to its likely success, that as a matter of discretion, I was justified in refusing the application on that ground alone. I therefore dismissed the renewed amendment application. 64I should explain in outline why I formed an adverse view as to the legal merits of the proposed cause of action. It assumed an entitlement by the plaintiff to recover damages from the Registrar-General for breach of a common law duty of care. The negligence was said to be constituted by the Registrar-General's conduct in acting on the basis of a forged power of attorney. Although it was not necessary for me to reach a final conclusion, I took into account the following issues of law in dismissing the application: (a) It seemed likely to me that, on its proper construction, the effect of Section 120 of the RPA is to limit a person in the plaintiff's position to a statutory claim against the Registrar-General in accordance with proceedings taken pursuant to Part 14 of the Act. To allow both a statutory claim and a common law claim against the Registrar-General could in certain circumstances become unmanageable and might tend to proliferate litigation for no good purpose. In Challenger Managed Investments Ltd v Direct Money Corp. P/L [2003] NSWSC 1072 at [70] Bryson J expressed a similar albeit preliminary view. Although his Honour added that he was not confident about the opinion he expressed, my own view is that his first reaction was probably correct. The scheme contemplated by Part 14, in particular by the statutory claim under Section 129, appears to be comprehensive. It is so likely to overlap with a cause of action in negligence that it is, I think, reasonable to infer that the legislature intended that the statutory cause of action should be exclusive. If it were otherwise, the efficacy of the statutory scheme might be subverted. The statutory intention is clear and explicit from Section 120(4). It imposes a mandatory requirement that "proceedings against the Registrar-General" be taken in accordance with Part 14. The proceedings to which subsection (4) refers are proceedings for compensation of the type described in Section 120(1). That description covers most conceivable claims. It certainly includes the plaintiff's claim on which Mr Yee relies in this case. (b) It also seemed likely to me that, even if the cause of action for breach of duty of care were available against the Registrar-General, the terms of Section 36(3) of the RPA would provide the Registrar-General with a good arguable defence having reasonable prospects of success. It provides that the Registrar-General has a statutory entitlement to assume, where a dealing or document purports to have been executed under a power of attorney, that there was sufficient power or authority for it being signed or otherwise executed. That seemed to me to be another factor against the likelihood of success of the proposed cause of action.

Plaintiff's Claim against First and Second Defendants 65The plaintiff seeks various relief against the first and second defendants - both of whom have left the jurisdiction. They did not appear but I am more than satisfied on the evidence before me that the plaintiff is entitled to relief against them. I will not repeat the findings of fact that I have made but the first and second defendants procured and concocted the fraudulent power of attorney and set in train the events that ultimately deprived the plaintiff of her property. They were the controlling minds of the fraudulent scheme and the immediate beneficiaries of the fraudulent acts. 66Ordinarily it would be appropriate to make a declaration that the first and second defendants hold the property on constructive trust for the plaintiff. However, the property has been transferred to a third party who is a bona fide purchaser for value without notice and I am unable to do so: Section 45 RPA. It is appropriate however that I order the first and second defendants to account for the net proceeds of sale received by them. They held those monies on a constructive trust for the plaintiff. They should also pay damages, interest and costs.

Interest 67The plaintiff seeks interest as against all defendants. She is entitled to do so under Section 100 of the Civil Procedure Act 2005 . There is no reason why interest should be payable by the Registrar-General on the market value of the land when that value is calculated at the date of judgment. Her economic position will be the same as it would have been had she never been defrauded of her property. For the same reason, it would be inappropriate to award interest on the stamp duty I have awarded her. Interest is appropriate however on the associated professional costs to which the plaintiff is entitled pursuant to Section 129A. The Registrar-General should pay interest on those amounts calculated from the dates of payment. The orders and judgments against the first and second defendants should of course include interest. The claim for rent already paid is an award of special damages. The plaintiff should have the benefit of interest on rental monies paid. I will order that interest be payable on the rent already paid to the date of judgment.

Conclusion 68In general terms, the outcome should be as follows: (a) The plaintiff is entitled to: (i) an award of compensation from the Assurance Fund in the sum of $3.8 million plus legal, valuation and other professional costs as agreed or otherwise determined. (ii) judgment against Mr Yee (the fourth defendant) for the amounts referred to in paragraph 46(b) and (c) above reduced to reflect the proportionate responsibility that I have held is appropriate. (iii) orders, declarations and damages, excluding exemplary damages, against Fernando and Anna (the first and second defendants). (b) The Registrar-General is entitled to judgment against Mr Yee in the sum of $3.8 million plus professional costs reduced to reflect the proportionate responsibility that I have held is appropriate. (c) The amount of the judgments against Mr Yee in paragraph (a)(ii) and (b) must be subject to the limitation on liability imposed by the Professional Standards Act 1994 . (d) The defendants should pay the plaintiff's costs. (e) Mr Yee should pay the Registrar-General's costs, excluding the latter's liability for the costs of the plaintiff. 69The plaintiff's solicitors should, if possible, deliver agreed short minutes of order to my associate setting out the precise amounts which should be the subject of these proposed orders. If any further submissions are necessary, or additional orders sought, the proceedings should be listed before me in the Expedition List on 2 or 9 December 2011. Alternatively, I will refer the matter to an Associate Justice for assessment of damages and final orders in accordance with these reasons.

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: 25 November 2011