Zakka v Elias

Background 9Ms Rahe and her brother are related (though not closely) to Mr Zakka by marriage. Mr Zakka was at all relevant times unemployed and on a disability pension. Ms Rahe was admitted as a lawyer and held a restricted practising certificate issued by the Law Society of New South Wales from 4 April 2003. Ms Rahe had been employed from around October 2002 by Mr Elias to perform secretarial or administrative tasks, while she was studying law. From early April 2003, Ms Rahe was employed in Mr Elias' sole practice as a solicitor (though it appears that she continued to perform some administrative tasks, such as answering office telephone calls). 10Under her restricted practising certificate, Ms Rahe was entitled to practise as an employed solicitor in private practice but not as a partner of a firm or on her own account. (This is relied upon by Mr Murr as support for the contention that the acts of Ms Rahe were carried out in the course of her employment with Mr Elias and gave rise to vicarious liability on his part.) 11When Mr Zakka sought Ms Rahe's assistance as a solicitor in relation to each of the transactions in question it was in a social/family context. 12As to the Permanent loan, Mr Rahe had asked that Mr Zakka lend him $50,000. Mr Rahe introduced Mr Zakka to Mr Allem who arranged the finance. (Her Honour found that the application for finance from Permanent contained misrepresentations by Mr Zakka and that Mr Rahe had also engaged in misleading conduct in relation to that borrowing. However, Ms Rahe was not aware of this.) Mr Rahe told Mr Zakka that his sister was a solicitor and suggested that Mr Zakka see her to help him with the documents needed for the Permanent loan. In turn, Mr Rahe asked his sister to help Mr Zakka with that loan. Ms Rahe did not learn that the money was to be paid directly to Mr Rahe until receipt of directions for the settlement of the loan. The loan to Mr Rahe was unsecured and not documented. There was no evidence of repayment by Mr Rahe. 13As to the First Mortgage Company loan, entered into later that year, Mr Zakka's evidence was that he wanted his $50,000 back and that Mr Rahe suggested to him that he (Mr Zakka) borrow more money with the assistance of Mr Allem and then lend that money to Mr Allem. Mr Zakka telephoned Ms Rahe in September 2003 and asked her to help with another loan. He then visited her at her home with the First Mortgage Company loan documents and asked her to witness his execution of the loan documents, bringing with him a signed but undated copy of the Alispur loan agreement. 14Mr Zakka's evidence as to the reason that he wanted to enter into the October transactions was inconsistent with the statements made by him to Ms Rahe and By Mr Fady Gemayal (whose wife was Mr Zakka's cousin) and is inconsistent with what happened. Mr Zakka said in evidence that he understood the purpose of that loan to be so that Mr Rahe could pay him back the $50,000. However, if so, that does not explain the fact that the loan was for a much greater amount than the $50,000 or the fact that a substantial sum was paid from the proceeds of that borrowing to Alispur. Ms Rahe (whose evidence was accepted by her Honour) said that Mr Zakka had told her that he wanted to borrow the money to invest in Mr Allem's business at a 20% interest rate. (Her Honour, by reference to inconsistencies between Mr Zakka's evidence and other evidence, found Mr Zakka's evidence to be generally unreliable.) 15The assistance that Mr Zakka sought from Ms Rahe was the witnessing of the First Mortgage Company loan documentation (although, having done so, she then communicated with lawyers for the lender on Mr Zakka's behalf and attended to the conveyancing aspects of the loan transaction). He accepted (inconsistently with what he had said in his statement) that he had not asked Ms Rahe for advice as to whether the investment was a "good deal" (Black 54N), though he had earlier said in cross-examination that he thought Ms Rahe would know and would tell him if it was a good deal. 16In Ms Rahe's statement (Supplementary Blue 295 at [18] and [20]), Ms Rahe states that she twice told Mr Zakka that she had "heard Louie Allem is a con" and not to do any deals with him, including words to the effect: "Victor, I do not want to sign or witness any of these documents nor do I want you to sign any of them." That advice was given both in the initial telephone conversation in which Mr Zakka asked for her help in relation to the further loan and when he came to Ms Rahe's home with the First Mortgage Company loan documentation for her to witness. In cross-examination, Ms Rahe maintained that she had told Mr Zakka "in the beginning" that "it was a con anyway" (Black 178H-L) and that: ... I told him Louie was a con and just to be careful, but he was quite adamant he wanted to proceed, I mean, I just went with what he told me. He said he wanted to go ahead after I told him several times, one at my home, not to go ahead, and mum was present when I did tell him that, and he refused. He said it was urgent; he said he needed to get the documents back to the bank or to Louie; I'm not sure. He took the documents with him. (Black 178P) 17Ms Rahe's evidence as to the warnings she gave Mr Zakka was confirmed by her mother. Moreover, Mr Gemayal gave evidence in his statement about a discussion with Mr Zakka in 2005 in which he said Mr Zakka told him that Ms Rahe "did advise me that the deal was risky". Mr Zakka denied having told Mr Gemayal that Ms Rahe had advised him the deal was "risky" (Black 66P) but Mr Gemayal maintained in cross-examination that that conversation had occurred (Black 148O) and her Honour preferred Mr Gemayal's account. 18As to the general unreliability of Mr Zakka's evidence I note that he also denied that Ms Rahe had told him that she had heard that Mr Allem was a "con" and that he should not sign the documents (Black 55K-Q), evidence supported by both Ms Rahe's mother and Mr Gemayal. This is now not disputed and, on appeal, it was conceded that Ms Rahe did give those warnings to Mr Zakka and that she did so "forcefully". Similarly, Mr Zakka also gave evidence that he believed the whole of the proceeds of the First Mortgage Company loan were being on-lent to Mr Allem and that he knew nothing about Alispur, though he had already signed the documentation providing for the loan to Alispur by the time the he went to Ms Rahe's home with the unsigned First Mortgage Company loan documents. 19Mr Zakka accepted in cross-examination that he had already decided to lend the money to Mr Allem when he met Mr Allem (Black 51N) and that he had already made the decision to borrow the money from First Mortgage Company before he went to Ms Rahe (at Black 54E). That is consistent with Mr Zakka having signed the Alispur agreement before he consulted Ms Rahe (as her Honour found). 20Ms Rahe says that she explained the First Mortgage Company loan document to Mr Zakka and informed him that if he defaulted on the loan he would lose his house. Mr Elias' evidence (unchallenged in cross-examination) was that when the claim by Mr Zakka was later made and Ms Rahe explained to Mr Elias for the first time what she had done, Ms Rahe told him that she had told Mr Zakka of the risk that Alispur might not make the repayments. Whatever the precise content of Ms Rahe's advice as to the risk that Mr Zakka might lose his house (i.e. whether or not it was linked to whether Alispur performed its obligations under its loan agreement), it is clear from Mr Zakka's statement to Mr Gemayal that he understood from the advice given to him at the time that the October loan transactions were a "risky" investment. 21Ms Rahe accepted (at Black 179P) that she had looked through the Alispur loan agreement and had seen that the interest rate was 20% per annum. She believed that she had seen that the loan was to be secured by an unregistered second mortgage. Ms Rahe accepted in cross-examination that 20% was an "exorbitant" interest rate although she apparently did not consider that to be unusual. 22Ms Rahe gave no advice to Mr Zakka on the terms of the Alispur loan agreement or its effect. Her evidence was that Mr Zakka had already signed it and that Mr Zakka told her it had been explained to him by Mr Allem and Ms Janet Obeid (an employee of Mortgage Advisory Services). (Mr Murr emphasises that any such advice was not independent and therefore, given Ms Rahe's view of Mr Allem as a "con", must have been appreciated by her as being likely to be misleading.) 23There is an unexplained oddity in respect of the October loan documents in that it seems that in some instances the same documents were signed on two occasions but with different details inserted. So, for example, there were two indicative approval letters from First Mortgage Company each signed by Mr Zakka: one dated 5 September 2003, the other dated 17 September 2003 (Supplementary Blue 192 and 196). Further, Mr Zakka signed both a "payment of fees direction" to Mortgage Advisory Services dated 15 October 2003 (Supplementary Blue 231) and two irrevocable authority and direction forms on Mortgage Advisory Services letterhead (Supplementary Blue 232 and 233). The first irrevocable authority form, dated 19 September 2003, refers to Mr Zakka's solicitor as Mr Robert Wehbe of Robert Wehbe & Associates; the second, dated 15 October 2003, names Mr Zakka's solicitor as Ms Delilah Rahe of Cadmus Lawyers. It is not clear what involvement, if any, Mr Wehbe may have had in relation to the proposed loan transaction. 24As already noted, Mr Zakka did not consult Ms Rahe at Mr Elias' office. Rather, he visited her at her home seeking her assistance as a solicitor to witness documents and to act for him in relation to the loans. No client file was opened for Mr Zakka at Mr Elias' office. There was no written retainer or costs agreement between Mr Zakka and Mr Elias (nor, for that matter, any written agreement between Mr Zakka and Ms Rahe). 25Ms Rahe (at Black 160Q) said that Mr Zakka "knew he was getting it for free and he knew I was doing it behind my boss' back" (my emphasis). Mr Murr challenges this last contention on the basis that it was not put to Mr Zakka in cross-examination. However, whether or not Mr Zakka in fact understood Ms Rahe was acting 'behind the back' of Mr Elias (in the sense of actively concealing her conduct from him), he must surely have realised that Ms Rahe was providing assistance as a favour to him (since there was no suggestion of any payment by him for her legal services) and was doing so without any formal agreement (since he must have known that he had not signed any client or other agreement with Mr Elias or Cadmus Lawyers in relation to the assistance being provided to him by Ms Rahe and had not attended the office of Cadmus Lawyers on any occasion in relation to the loan transactions). 26Mr Elias gave evidence (which her Honour accepted) that he did not permit his staff (including Ms Rahe) to accept instructions from existing or new clients or to open new files without his knowledge or approval ([4(a)] of his statement) and that he had told Ms Rahe that she had no authority to take on a new client or new matter without approval ([6]). Mr Elias' evidence was that Ms Rahe never had her own files but was working with him and helping him on 'his' files (Black 93P). 27Her Honour accepted that Mr Elias was unaware of the assistance that had been provided by Ms Rahe to Mr Zakka in relation to these transactions until the commencement, or shortly before the commencement, of the District Court proceedings. This was because, as her Honour found, Ms Rahe had actively concealed from Mr Elias the steps that she took on behalf of Mr Zakka in relation to the respective loan transactions. Ms Rahe kept the documents relating to Mr Zakka's loans in a manilla folder which she mostly kept at home (but took to work when required); used a computer at the office to which Mr Elias did not have access to create the relevant correspondence in relation to the transactions; intercepted telephone calls and mail so as to ensure that Mr Elias did not become aware of any communications regarding the matter; and engaged a different company from that customarily used by Mr Elias to conduct searches (so that no reference to Mr Zakka's transactions would appear on invoices to the firm from that search company). 28It is clear from Ms Rahe's evidence (which her Honour accepted) that Ms Rahe was providing assistance to Mr Zakka as a favour to him (first, at her brother's and then at Mr Zakka's request), and was doing so at no cost to him (which supports the inference that he did not believe this to be an engagement of the services of the firm) and, in the case of her involvement in relation to the October transactions, that she was doing so reluctantly. 29The Alispur loan agreement provided that the loan was to be secured by an unregistered second mortgage and protected by caveat over a property identified by reference to an address at Northmead (with a reference number that may have been intended to be a folio reference, although that is not clear). The conveyancing expert called for Mr Zakka, Mr Moses, noted that a caveat was in fact lodged on behalf of Mr Zakka but that it was lodged by Alispur and not by Ms Rahe (and was subsequently withdrawn by Alispur). Ms Rahe seems to have been aware that such a caveat had been lodged, since by letter dated 20 June 2005 she wrote (on the letterhead of Cadmus Lawyers) to Mr Allem raising an issue as to the withdrawal of a caveat and complaining that notice had not been received of any application for a lapsing notice (Supplementary Blue 268, the letter referring to withdrawal of a caveat "on one of your properties in order to protect our client's interests"). 30Mr Zakka received some small amounts of money from Alispur (or Mr Allem) whether by way of interest or otherwise, in relation to the $250,000 loan but subsequently Alispur went into liquidation (with creditors claiming some $18 million) and Mr Zakka defaulted on the repayments due on the First Mortgage Company loan. As a consequence, the lender exercised its rights as mortgagee to take possession of Mr Zakka's home and it was sold, leaving a shortfall of some $150,000 owing on that loan.

Expert evidence 31Expert evidence was called for Mr Zakka on two issues. 32First, as to Mr Zakka's intellectual ability. This was relevant in that the case run at first instance raised allegations of breach of duty in the failure to advise Mr Zakka that these were improvident transactions and in the failure clearly to explain to him the relevant transactions in plain and simple English. 33An expert report by Professor Susan Hayes assessed Mr Zakka's language skills as being in the category of mild intellectual disability through to borderline intellectual disability. Professor Hayes noted that Mr Zakka had specific difficulty with verbal reasoning and reading; and also difficulty with his memory. Professor Hayes observed Mr Zakka's responses in conversation to be "inordinately slow". 34Various of the lay witnesses (Ms Rahe and Mr Gemayal) gave evidence as to their observations of Mr Zakka's intellectual ability and her Honour had the opportunity to observe Mr Zakka giving evidence in the witness box. 35Her Honour accepted that it might be necessary to explain complex matters to Mr Zakka in plain and clear English but did not accept that he had significant cognitive deficits that should have been apparent to Ms Rahe. Her Honour found that Ms Rahe was entitled to conclude that Mr Rahe understood her advice if it was expressed in plain and clear English. There is no challenge to these findings. 36Second, there was expert evidence from Mr Neville Moses, an experienced conveyancing practitioner, as to what would be regarded as the standard or usual practice of a competent conveyancing practitioner in relation to the respective loan transactions. Mr Moses prepared a statement dated 25 November 2009. Mr Moses was of the opinion that, even if Ms Rahe was acting only as a volunteer, she should have assisted Mr Zakka in the same way as she would have assisted an independent paying client with the knowledge, capacity and experience which she knew or believed Mr Zakka to have ([17]). No issue is taken with that proposition. 37In relation to the Permanent loan (and subsequent on-lending of $50,000 to Mr Rahe), Mr Moses was of the opinion that:

• it was "strange" ([25]) that Ms Rahe had failed to ask Mr Zakka why he was borrowing the money (something her Honour considered not to be a breach of duty by Ms Rahe) but in any event that as soon as Ms Rahe became aware of the interest of her brother in the loan (and despite the fact that this may have been at a late stage of the transaction), she should have realised that there was a serious possibility of conflict of interest; declined to assist Mr Zakka any further; and strongly advised Mr Zakka to obtain independent legal advice in relation to the matter ([26]-[27]);
• Ms Rahe should have pointed out "in the strongest possible terms" to Mr Zakka that what he was proposing was to make an unsecured loan to her brother and that he should not do so without security and an appropriate loan agreement "making provision for the repayment of the loan documented in a similar fashion to the loan agreement which he had signed with the lender" ([28]); and that
• Ms Rahe had facilitated the making of an unsecured loan by Mr Zakka to her brother without appropriate advice as to the wisdom of so doing where she was clearly subject to a conflict of interest ([30]). 38As to the First Mortgage Company and Alispur loans, Mr Moses was of the opinion that:
• Ms Rahe "seems not to have realised that without her assistance [Mr Zakka] was unlikely to be able to carry out the formal steps required to complete the borrowing of the money [from First Mortgage Company] and would then have been likely to obtain the services of an independent adviser who would surely have strongly advised him against making the loan [to Alispur] or at least to obtain appropriate security (which most likely would not have been forthcoming)" ([36]); (I interpose to note that the basis on which Mr Moses considered it most likely that "appropriate" security would most likely not have been forthcoming was not clear. If, by that, Mr Moses was referring to a first registered mortgage, it is not suggested by Mr Moses that there would be a breach of duty simply in acting on a transaction where the security provided was a second unregistered mortgage.)
• an independent solicitor would have advised Mr Zakka that the equity of Alispur in the property nominated [as security] should have been ascertained by way of valuation and evidence as to the amount secured against the property under any relevant mortgages and encumbrances on the title (including a title search and other information that in the normal course the borrower would be required to obtain and provide in verifiable form) ([39]);
• evidence of Alispur's assets and liabilities should have been obtained and consideration given to taking personal guarantees from the director or directors of the company, (Mr Moses observing that Mr Allem would "no doubt" have been happy to give such a guarantee since his bankruptcy statement indicated that he had given a large number of guarantees - though I note that the worth of those, in the events that have transpired, would seem to be questionable) ([40]);
• at the very least (had it been established that Alispur had significantly more equity in the property than the amount of the loan and had Mr Zakka had decided to proceed with the loan) a caveat would have been lodged on the title ([41]); though it would have been more desirable to obtain priority agreements with prior mortgagees and encumbrancees ([42]); and
• it was almost certain that the outcome of any such investigations by an independent solicitor would have made it clear that the loan proposed to be made would in fact be unsecured and that, although the interest rate was high, "to make an unsecured loan to a company with no significant assets was a recipe for disaster" ([43]). 39As to the lodgement of a caveat, Mr Moses stated that he was unable to opine as to whether, if the caveat had been lodged by Ms Rahe or Mr Zakka and maintained, this would have improved Mr Zakka's position as a lender with an equitable mortgage over the property. Presumably that would have depended on whether any subsequent encumbrancees had been able in the meantime to obtain priority over Mr Zakka's unregistered interest and whether Mr Zakka would have recovered anything in the company's liquidation in that event that he cannot now recover. 40Mr Moses also expressed his opinion as to matters relating to the existence of any retainer, the capacity of Mr Zakka and whether Ms Rahe was acting in the course of employment (though noting that those were matters for the Court to determine). 41Mr Moses considered that Ms Rahe's actions in each of the two transactions identified by him (i.e. the Permanent loan and the October loans) amounted to a very serious failure to comply with standard practice ([55]). 42In cross-examination, when asked to assume that the solicitor carrying out the retainer (i.e. Ms Rahe) was of the view that the principal behind the borrower (i.e. Mr Allem) was "a con" and questioned as to how that would affect the opinion he had given, Mr Moses said (from Black 86.15): Well, obviously it makes you more concerned to ensure that the client understands the usual precautions and urge the client to take them. The less reliable the borrower is going to be, then obviously the more important it is to take the precautions; I mean that's just a fact of life. If - it's just that most people who are borrowing and [sic., scil on a] second mortgage in those situations are not, in my experience, likely to be people of great wealth anyway. So, you're always a little suspicious of them simply because they find it necessary to borrow on this basis and they can't go to a bank and some financial institution who will offer better terms. I mean, I think this was a 20% interest rate, was it not, something like that? That of itself to any solicitor is a warning that the borrower is likely to be someone who needs money rather badly and therefore it's important to insure that you've got security so it will be repaid. 43It is clear that Ms Rahe did not take the steps identified by Mr Moses as those that a competent conveyancing practitioner would have taken in relation to either of the respective transactions (other than that she had warned Mr Zakka in September/October as to entry into any deals with Mr Allem). 44While Mr Moses' report seems to assume (contrary to her Honour's ultimate findings) that the retainer (or assumption of responsibility by Ms Rahe giving rise to a duty to advise) in relation to the First Mortgage Company loan extended to both that and the Alispur loan, Mr Moses made clear in both cross-examination (from Black 82.39) and re-examination (at Black 85.30) that he considered that a duty to give advice as to the risks of the transaction would have arisen notwithstanding the terms of the retainer, that duty being referred to by him as a "penumbral" duty of care.

Findings 45A number of the factual findings have already been canvassed, and need not be repeated. I add the following. 46When dealing with the claims made by Mr Zakka in relation to the $50,000 loan to Mr Rahe, her Honour found that there was an agreement between Mr Zakka and Ms Rahe for Ms Rahe to provide legal services and that it was not limited to assisting with the paperwork for the transaction (Red 56K; Red 56N-S). Her Honour found that Mr Zakka had consulted Ms Rahe because he needed a solicitor; that Ms Rahe was aware that this was the reason he consulted her and that Ms Rahe undertook the tasks of a legal practitioner (and appreciated that the tasks were those of a legal practitioner) (Red 56 F-J). Those findings are not challenged. 47Her Honour found Ms Rahe liable in respect of the $50,000 Permanent loan. Ms Rahe's liability derived from the finding that, at the time Ms Rahe became aware Mr Zakka was borrowing money to lend it to her brother, a competent solicitor in her position would have: realised that there was a serious possibility of a conflict of interest; declined to assist Mr Zakka further; and strongly advised him to obtain independent legal advice (Red 57V). 48Ms Rahe's breach of duty was found to have been causative of the loss in relation to the $50,000 transaction (Red 58F). Her Honour accepted that an independent solicitor would have advised Mr Zakka against lending money to Mr Rahe without security and without an appropriate loan agreement; and was satisfied on the balance of probabilities that Mr Zakka would have accepted that advice and therefore that the loan (to Mr Rahe) would either not have proceeded or would have been secured (Red 57V - Red 58D). 49Her Honour's finding that Mr Zakka would, on the balance of probabilities, have accepted and acted upon the advice her Honour found that Ms Rahe should have given, is relied upon by Mr Murr when addressing the finding made by her Honour as to causation in respect of the October transactions. The basis on which her Honour found that Mr Zakka would on the balance of probabilities have taken that advice is not expressed but was presumably an inference drawn from the surrounding facts and objective circumstances - as is recognised in Baiyai Pty Ltd v Guy [2009] NSWCA 65 to be a reliable guide on questions of causation. There is no challenge to that finding. 50In relation to the October transactions, while her Honour accepted that the borrowing from First Mortgage Company and the Alispur loan were interrelated (Red 58I) and that there was a retainer between Mr Zakka and Ms Rahe (which arose on Ms Rahe's assumption of responsibility in relation to the First Mortgage Company loan transaction (Red 60J)), her Honour made no finding of any retainer between Mr Zakka and Ms Rahe in relation to the Alispur loan. 51Her Honour was not persuaded that Ms Rahe came under any duty of care in relation the Alispur loan (Red 60X). Thus her Honour cannot have been satisfied that the retainer in relation to the First Mortgage Company loan extended that far. Further, in rejecting the existence of a duty of care in relation to that loan, her Honour also implicitly rejected the contention that a penumbral duty of care had arisen in the context of the retainer that was found to have arisen (that being the retainer in respect of the First Mortgage Company loan). 52Her Honour nevertheless went on to say at (Red 61T) that if (contrary to her conclusion that there was no duty of care owed by Ms Rahe in relation to the Alispur loan) Ms Rahe should have given advice to Mr Zakka in relation to the Alispur loan, then Ms Rahe had complied with that duty of care. Her Honour noted that: [Ms Rahe] expressly told [Mr Zakka], more than once, not to go ahead. She warned him that Mr Allem was a con. She warned him he could lose his house. I find that she explained the risk and the possible consequences of proceeding and that [Mr Zakka] understood that advice but decided not to accept it. 53Furthermore, her Honour was not satisfied that any negligence on the part of Ms Rahe (in relation to the October transactions) had led to any loss (Red 61P), since Mr Zakka remained under an obligation (to Alispur) to invest the $250,000 and the available evidence was to the effect that Mr Zakka would have had to borrow that money from a third party. 54Her Honour found that it was likely that Mr Allem would have insisted that Mr Zakka comply with his legal obligation to invest in his company (Red 61G) and declined to find that the Alispur loan would have been set aside in equity (on the basis suggested for Mr Zakka that it was by its nature an improvident agreement and that Mr Zakka was under an obvious disability). Her Honour also declined to draw the inference that the Alispur transaction would in all likelihood have fallen away if Mr Zakka had not obtained the First Mortgage Company loan (Red 61G). 55Her Honour thus considered that Mr Zakka's loss arose, not from any negligence on Ms Rahe's part but instead from his decision to invest in the Alispur loan (Red 61R). 56As to the position of Mr Elias, her Honour found that there was no express or implied retainer by Mr Zakka of Mr Elias in relation to any of the loans (Red 54J-K). Her Honour further found that Ms Rahe was not acting in the course of her employment or (adopting the terminology used by Gummow and Hayne JJ in State of NSW v Lepore (2003) 212 CLR 511) in the ostensible pursuit of Mr Elias' business or the apparent execution of the authority which, as employer, Mr Elias held his employees out as having (Red 54M-S).

Appeal 57The issues on appeal are relatively narrowly confined: whether her Honour erred in not finding that Ms Rahe breached a duty of care owed to Mr Zakka in relation to the First Home Mortgage loan/Alispur loan transactions; whether causation was established in relation to that alleged breach of duty; and whether Mr Elias is vicariously liable for Ms Rahe's negligence on the basis that the torts of Ms Rahe were within the course of her employment. (i) Breach of duty - Grounds 1 and 2 58The first two grounds of appeal relate to this issue. It is contended that her Honour erred: 1. in failing to find that Ms Rahe breached her duty of care to Mr Zakka by failing to advise him, in relation to the further proposed transactions [defined as the First Mortgage Company borrowing and the Alispur loan], to obtain independent legal advice and not to provide money without adequate security and an appropriate loan agreement; and 2. in finding that such advice as Ms Rahe gave to Mr Zakka in relation to the further proposed transactions was sufficient to discharge her duty of care. (my emphasis) 59As adverted to above, the import of her Honour's conclusion that Ms Rahe had no duty of care to advise in relation to the Alispur loan is not only that the retainer between Ms Rahe and Mr Zakka did not extend to that loan transaction but also that no such duty of care arose in the course of Ms Rahe performing legal services under the retainer that was found to have existed. The reason her Honour found no duty of care in relation to the Alispur loan (Red 60V-Z) was that the loan documents with Alispur had been signed by Mr Zakka before he first consulted Ms Rahe (Red 60T). 60Mr Murr submits that the First Home Mortgage borrowing by Mr Zakka and his on-loan to Alispur should be regarded as part of a composite transaction (and not, as her Honour dealt with them, as separate transactions), and hence that the assumption of responsibility by Ms Rahe for advising Mr Zakka extended to the on-lending to Alispur. I am not persuaded that her Honour erred in finding that the retainer between Mr Zakka and Ms Rahe extended only to the assistance to be provided by Ms Rahe, in her capacity as a solicitor, in relation to the First Mortgage Company loan. 61The Alispur loan agreement (whether or not binding as a matter of law and whether or not able to be set aside as an improvident transaction - those being contentions raised by Mr Murr as going to the issue of causation) had already been signed when it was shown to Ms Rahe. She was told by Mr Zakka that it had already been explained to him (and that he understood it). Ms Rahe was not asked to do anything in relation to the Alispur loan. Ms Rahe did nothing about it (which one would have expected had she understood there to have been a request made for assistance in relation to it) and, more significantly, Mr Zakka did not suggest at the time that she should do anything about it. I see no error in the implicit finding by her Honour that (contrary to the position in relation to the First Mortgage Company loan) there was no assumption of responsibility by Ms Rahe for the second part of the October loan transactions. 62However, that does not dispose of the question whether Ms Rahe was in breach of a duty of care arising otherwise than by way of a retainer in relation to the Alispur loan transaction. It is contended by Mr Murr that (irrespective of whether the retainer extended that far) a duty arose on the part of Ms Rahe to advise Mr Zakka as to the risks of the Alispur loan transaction once she became aware (in the course of assisting Mr Zakka in relation to the First Mortgage Company loan) of those risks. 63The thrust of Mr Zakka's appeal on this first issue is the contention that Ms Rahe had a penumbral duty, in the sense considered in David v David [2009] NSWCA 8 (and referred to in the witness box by Mr Moses), to provide advice beyond the scope of her retainer once she became aware that the Alispur loan was at a high rate of interest and was to be secured only by an unregistered second mortgage. In David v David, Allsop P, as his Honour then was, said that: ... the notion that a solicitor may owe a client a "penumbral" duty that extends beyond the scope of the retainer is doubtful. If, however, the solicitor during the execution of his or her retainer learns of facts which put him or her on notice that the client's interests are endangered or at risk unless further steps beyond the limits of the retainer are carried out, depending on the circumstances, the solicitor may be obliged to speak in order to bring to the attention of the client the aspect of concern and to advise of the need for further advice either from the solicitor or from a third party. (my emphasis) 64Mr Murr emphasises that Mr Zakka had brought with him to the meeting at Ms Rahe's house the Alispur loan agreement and that Ms Rahe was made aware not only of the fact that Mr Zakka was borrowing in order to lend a substantial part of that money to Alispur but also of the terms of the loan agreement by which that was to occur. (He also points to the evidence that Mr Zakka considered there to be some urgency as to the execution of the First Mortgage Company loan documentation.) 65Mr Murr contends that Ms Rahe (who knew that Mr Zakka was unemployed and on a disability pension) was on notice of the clear risk (arising from the fact that Mr Zakka was dependent on Alispur to be able to repay his loan); that Mr Zakka would be unable to repay the First Mortgage Company loan; and that, if the security provided for the Alispur loan was inadequate, then he would lose his home. It is submitted that this was a real risk that warranted a warning by Ms Rahe. 66Mr Murr also argues that since Ms Rahe knew that the advice given to Mr Zakka as to the Alispur documents was advice that had been given by Mr Allem and Ms Obeid, she knew that it was not independent advice and that, given her view of Mr Allem as 'a con', Ms Rahe must have realised that the advice was likely to be misleading. If it is suggested by this that there was another particular of negligence, namely failure to draw to Mr Zakka's attention that the advice he had already received about the Alispur documents was or might be misleading, that was not part of the case as pleaded (and, whatever was thought to be Mr Allem's untrustworthiness, there is nothing from which one could infer that an explanation by Ms Obeid was likely to be misleading, albeit that it was advice provided by someone employed by a company that would benefit from the transaction by way of the receipt of fees). 67In any event, leaving aside the fact that Mr Allem and Ms Obeid had been the ones explaining the Alispur loan to Mr Zakka, I consider that there was a material risk inherent in the Alispur loan transaction such as to give rise to a duty on Ms Rahe's part to warn Mr Zakka of that risk even in the absence of a retainer in respect of that transaction. I consider that a reasonable and competent conveyancing practitioner would have attached significance to the risk that, if Alispur defaulted on the loan agreement, Mr Zakka might have difficulty enforcing the equitable mortgage and might therefore be at risk of losing his home and hence there was a duty to warn Mr Zakka of that risk. 68In AJH Lawyers Pty Ltd v Hamo [2010] VSC 225) Beach J held that there was a duty on solicitors to give 'holistic' advice in and around the client's retainer, unless the retainer was specifically limited to avoid the need for such advice. In "Lawyers Professional Responsibility", 5th Edn, Dal Pont observes (at [5.65]) that lawyers retained to carry out a transaction that is improvident from the client's point of view should consider "whether the client needs to be warned against pursuing the transaction, or at least advised explicitly of the risks to which he or she may be exposed". In the present case, I consider that the facts, as found by her Honour, gave rise to a duty on Ms Rahe's part of that kind and that her Honour erred in not so finding. 69However, the question then is whether Ms Rahe was in breach of that penumbral duty of care. It is contended by Mr Murr that any competent solicitor would have advised Mr Zakka of the very significant risk, in the circumstances, of losing his home. That, however, is precisely what Ms Rahe did. 70Further, it is contended that, if Mr Zakka had nonetheless insisted on proceeding with the loan transactions (and, relevantly, the question must be as to whether Mr Zakka would have insisted on proceeding with the one transaction on which Ms Rahe was assisting), Ms Rahe should have advised him to seek adequate security or alternatively should have declined to act for Mr Zakka. It is submitted that the latter course would have made the transaction[s] impossible (a submission I will come back to shortly). 71As already noted, her Honour considered that, on the assumption that Ms Rahe did owe a duty of care in relation to the Alispur loan, she had complied with that duty by telling Mr Zakka that she had heard Mr Allem was a "con" and by warning Mr Zakka in very direct terms not to do any deals with Mr Allem. Her Honour noted that Mr Zakka, being adamant that he wished to go ahead with the investment, chose to ignore that advice. 72There is no challenge to the finding that Ms Rahe did warn Mr Zakka (and did so forcefully) against entering into any dealings with Mr Allem (and that she told him of the risk that he could lose his home). Mr Murr suggested that there was a distinction between Ms Rahe telling Mr Zakka that she had "heard" he was a "con" and telling him that he was a "con". That distinction is moot since Ms Rahe's evidence in cross-examination went so far as to express her concerns in the latter, more definitive, terms and, in any event, what Mr Zakka was receiving in either case was a clear warning as to Mr Zakka's trustworthiness. 73The complaint made by Mr Murr as to the warning given by Ms Rahe is that she did not warn Mr Zakka of, or by reference to, particular shortcomings in the Alispur loan documentation or the nature of the security provided for that loan. It is submitted by Mr Murr that Ms Rahe should have: drawn Mr Zakka's attention to the nature of the security that was to be provided for the Alispur loan; given an explanation of the significance of it being a second mortgage (namely that there was a previous borrower; that if he needed to enforce it, he would be "second in the queue"); advised that the security, including the caveat, was worthless unless Alispur in fact owned the property offered as security and that whether Alispur in fact owned that property and its value (as well as the amount secured by any prior mortgagee or encumbrancee) should be checked; advised that an unregistered mortgage was more difficult to enforce; advised that the right to lodge caveats required further action and proper searches; and, perhaps, drawn to his attention that there was no personal guarantee). 74Furthermore, it is submitted that Ms Rahe should have drawn Mr Zakka's attention not simply to the risk that he might lose his home but in terms to the effect that, as Mr Zakka had a pension income and no assets other than his home, the loss of Mr Zakka's home was a "virtual certainty" if Alispur was unable to meet its repayment obligations and the security was insufficient to cover Mr Zakka's obligations to First Mortgage Company. As to this last submission, I am not persuaded that it was necessary for Ms Rahe to do more than warn Mr Zakka that he could lose his home. I do not consider it was necessary for Ms Rahe to advise him that this was a "virtual certainty", nor am I persuaded that a reasonably competent conveyancing practitioner would have been in a position to form such a view from a perusal of the Alispur loan document alone (even with the knowledge that Ms Rahe had as to Mr Zakka's financial position). Moreover, it is clear from the evidence of Mr Gemayal that Mr Zakka well understood at the time that the transaction in which he was entering was risky. The only risk to which Mr Zakka could have been referring in the context of the case was the risk that he might lose his home. 75It is instructive to consider how Mr Zakka's case had been pleaded in this regard. Paragraph [28] of the Further Amended Statement of Claim pleaded that Mr Elias, by his servant or agent Ms Rahe, or alternatively Ms Rahe, breached his or her duty of care and was negligent. The particulars provided of the negligence pleaded against Mr Elias and Ms Rahe were (as against both Mr Elias and Ms Rahe) as follows: (a) Failing to clearly explain to [Mr Zakka] the scope of his, or alternatively her, retainer, and the source of his, or alternatively her, instructions; (b) Failing to warn [Mr Zakka] against entering into the Further Proposed Transactions [namely, the First Mortgage Company loan and the Alispur loan] in circumstances where [Mr Zakka], to the knowledge of [Mr Elias and Ms Rahe], relied upon a disability support pension and would be unable to service or repay the First Mortgage Company Mortgage Loan; (c) Failing to ensure that [Mr Zakka] understood the nature and effect of the Further Proposed Transactions; (d) Failing to clearly explain to [Mr Zakka] the nature and purpose of the documents executed by him; (e) Failing to advise [Mr Zakka] of the risks to him associated with the First Mortgage Company Mortgage Loan, and in particular, the risk of losing the premises; (f) Failing to advise [Mr Zakka] that his interest in the premises, which was his only substantial asset, ought not be risked in a speculative venture; (g) Failing to ensure that such advice as he, or alternatively she, did provide to [Mr Zakka] was understood by him; (h) Failing to consider whether the capacity of [Mr Zakka] to understand the Further Proposed Transactions was impaired by undue influence or other cause; (i) Failing to advise that the Allem Agreement did not conform with [Mr Zakka]'s understanding of it; (j) Failing to advise [Mr Zakka] that he was not contracting with Louis Allem but rather with Alispur Pty Limited; (k) Failing to advise [Mr Zakka] that he was lending $250,000.00 to Alispur Pty Limited rather $304,000 to Louis Allem; (I) Failing to obtain an assessment concerning the adequacy of the security provided by Alispur, or if he, or alternately she, did obtain such an assessment, failed to warn [Mr Zakka] that the security was inadequate; (m) Disbursing an amount of $247,614.16 from the mortgage funds made available to [Mr Zakka] to recipients namely J Prammer, Office of State Revenue, the Farah Group and Mortgage Advisory Services Pty Limited without [Mr Zakka]'s knowledge or permission; (n) Failing to call for and peruse [Mr Zakka]'s credit application to First Mortgage Company Home Loan Pty Limited which document if perused by the second defendant, or alternatively the third defendant, would have been immediately noticed to be false in numerous particulars; (o) Failing to explain to [Mr Zakka] using small words often repeated that he was ill advised to enter into the mortgage transactions and the Further Proposed Transactions; (p) Failing to apprehend that [Mr Zakka] was unable to properly read or understand the written word; (q) Failing to warn [Mr Zakka] that the credit application, being false in numerous particulars, would render [Mr Zakka] or may render [Mr Zakka] subject to criminal prosecution or alternatively civil action by the proposed mortgagee; (r) Knowing that [Mr Zakka] had severe intellectual and cognitive problems and was a disability pensioner with subnormal literacy skills, failing to strongly counsel and advise [Mr Zakka] not to enter into the Further Proposed Transactions. 76There were additional particulars of negligence asserted as against Mr Elilas that are no longer pressed on the appeal and then the following additional particulars of negligence against Ms Rahe: (z) Failing to refer [Mr Zakka] to another solicitor in circumstances where she was the sister of a person obtaining a benefit from the Further Proposed Transactions; (aa) Failing to warn [Mr Zakka] that the Further Proposed Transactions were imprudent transactions and failing to counsel [Mr Zakka] against entering into the Further Proposed Transactions. 77Of the particulars of negligence set out above, a number were not pressed or do not arise having regard to unchallenged findings of her Honour (such as (a), (g)-(k), and (m)-(q)). Furthermore, in broad terms, the allegations as to failure to warn Mr Zakka against entering the October loan transactions (in (b), (e), (f), (r) and (aa)) all suffer from the fact that Ms Rahe did indeed warn Mr Zakka in no uncertain terms (or to use the language of the pleadings, counselled him strongly) not to enter into any deals with Mr Allem. 78Insofar as (c) and (d) allege a failure to ensure that Mr Zakka understood the nature and purpose of the documents and a failure to explain to him the nature and purpose of the documents, those can only be read as relating to the First Mortgage Company loan documents (having regard to the scope of the retainer as found by her Honour) and there is no challenge to the finding that those documents were explained to Mr Zakka and understood by him. Moreover, Mr Gemayal's evidence was that Mr Zakka admitted to him that Ms Rahe had advised him that the deal was "risky". (A duty to warn of risks does not go so high as a duty to explain the precise clauses of the document.) 79Therefore, the nub of the present complaint (considered against the background of the case as pleaded and particularised) seems to be that her Honour did not find a breach of duty, first, by reference to the failure to warn Mr Zakka that the security for the Alispur loan was inadequate (or that he should obtain an assessment as to the adequacy of that security), as particularised at (l) and/or the failure to warn him that they were improvident transactions (aa), and, second, by reference to the fact that Ms Rahe should have referred Mr Zakka to another solicitor (in (z), that being predicated on Ms Rahe being the sister of a person obtaining a benefit from the said transactions). 80As to the first, given that Ms Rahe did warn Mr Zakka against entering the transactions and conveyed to him that they were risky, the question is whether, to comply with the penumbral duty of care that had arisen, it was necessary for Ms Rahe to have explained to Mr Zakka precisely why this particular transaction was such a risk (or the aspects of the loan agreement that made the transaction a risky one); in particular, that it was an imprudent or improvident transaction because of inadequate or no worthwhile security. 81In Cousins v Cousins (18 Dec 1990, unreported NSWCA judgment), when considering what advice a solicitor might have been obliged to give an elderly couple making a gift of their home to a family member (who had been advised that the transferee "could kick you out of the house when he felt like it but probably wouldn't under the circumstances"), Priestley JA (with whom Meagher JA agreed; Kirby P dissenting) said: ... On the facts of the present case, it seems to me that it would be possible to conclude that nothing more was required of the solicitor than to see that the gift the appellant and her husband wanted to make was effectually made. But assuming in favour of the appellant that the case was one requiring the solicitor to take further steps to avoid real and foreseeable risk of economic loss to her and her husband, two questions arise. One, which may be regarded as a somewhat technical question, is, what is the relevant economic loss against which the appellant and her husband should have been warned? In economic terms the appellant and her husband were transferring property to the first and second respondents. That is what they wanted to do. Economic "loss" consisted in their express intention being carried out. To avoid that economic loss, the solicitor would have needed to advise them against doing the very thing they had come to him to have done for them. Assuming however that the loss in regard to which the solicitor should have warned the appellant and her husband, or otherwise taken steps to protect their interests, was the loss of their residence, as a matter of fact, on the land they were giving away, the second question arises. What positive steps, beyond the specifically agreed professional task of enabling the parties to effectuate the gift, were required in the circumstances? Mr Elliot [the solicitor for the appellant] told the appellant and her husband what the legal position was. They knew from 4 May 1982 onward that if they went ahead with the gift they would have no right to stay in the residence on the land they intended to give away. They were old and the appellant's husband was not well. They were of sound mind. Mr Elliot's evidence that the appellant "appeared to have good comprehension of what my advices from time to time were about" and that he thought in 1982 that "she was a very astute business lady" was accepted. They gave the impression that they were sufficiently well off to be able to afford the gift without difficulty. Nothing to show that that appearance was wrong was put before the trial court. When the draft contract was sent to them they noted some mistakes in it and caused the solicitor to correct them. Between four and five months elapsed between the giving of the instructions to the solicitor and the eventual signing of the contract... the trial judge took the view that in the circumstances [sic] duty did not require the solicitor to do more than he had done. I agree. 82In Frost & Sutcliffe v Tuiara [2003] NZCA 277; [2004] 1 NZLR 782 the Court of Appeal in New Zealand rejected a claim of negligence against a solicitor who gave his clients a general warning against entry (at the request of a relative of theirs) into a particular transaction. The solicitor in question had given the following (succinct) advice (not dissimilar from the present, albeit in writing): "my initial advice to you would be don't", as well as some other general warnings (including that their home could be lost, without particularising the specific mechanisms by which that might occur and that independent advice should be sought from another solicitor). 83The fact that a risk is expressed in general terms (such as 'you could lose your home') or that the warning is in general terms (such as 'don't enter that transaction') does not mean that a solicitor will have failed to discharge a general duty to warn his or her client that the transaction was risky or as to the risks of the transaction. 84Here, the risk of the transaction was that Mr Zakka would lose his home if Alispur defaulted and he was unable to enforce the unregistered second mortgage or the security was insufficient to enable him to repay the loan that he had taken out. I am by no means persuaded that it was necessary for Ms Rahe to have spelt out in detail the ways in which Mr Zakka might have lost his home. She brought to Mr Zakka's attention the risk that he could lose his home; she told him not to do any deals with Mr Allem and not to sign the loan documents; and she warned Mr Zakka that Mr Allem was (or that she had heard he was) a "con". 85However, on balance I consider that Ms Rahe was in breach of a duty of care to Mr Zakka in failing to draw to his attention that he should consider, or seek further advice as to, whether the security for the Alispur loan was adequate for his protection and that he should make sure, at the very least, that an appropriate caveat be lodged to protect his interest which could not be withdrawn without notice to him. Those were matters that I consider a reasonably competent conveyancing practitioner would have considered should be drawn to Mr Zakka's attention, even where the practitioner was not acting on the Alispur loan, since the practitioner was on notice of facts that raised these as potential risks. (In saying that, I do not suggest that a solicitor in the position of Ms Rahe was required in the absence of a retainer then to advise on those matters, simply to draw them to the client's attention as matters that the client would be advised to address.) 86As to the second matter (the complaint that Ms Rahe should have ceased to act or should have referred Mr Zakka to an independent solicitor), it would only have been her duty to do so if there was a subsisting or fresh conflict of interest. As Mr Moses seemed to accept, it is not the duty of a solicitor to decline to act for clients who wish to enter risky transactions or transactions that may be improvident. 87Mr Murr contends that her Honour failed to consider that there was a subsisting conflict of interest on the part of Ms Rahe arising out of the interrelationship between the Permanent loan and the First Mortgage Company loan (that being the substance of the allegation of negligence in paragraph (l) of the particulars to [28]). This turns on the contention that Mr Rahe obtained a benefit from the discharge of the Permanent loan. The benefit so identified seems to have been that since Mr Rahe's failure to repay the $50,000 loan had left Mr Zakka exposed to action by Permanent to enforce the mortgage over his house, that also exposed Ms Rahe to legal action from Mr Zakka in relation to that loan. While there was some evidence that Mr Zakka had wanted the $50,000 back, the Court was not taken to evidence that Permanent had threatened enforcement action, so it is not clear whether there was more than a theoretical risk of exposure to suit in this regard. 88It was also submitted by Mr Murr that, had Ms Rahe refused to act for Mr Zakka in relation to the First Mortgage Company loan and had Mr Zakka received appropriate advice from an independent lawyer, this advice would in all likelihood have involved the bringing of actions against both Mr and Ms Rahe in respect to the $50,000 loan (and hence it seems to be suggested that Ms Rahe had a conflict of interest in avoiding a situation where someone might advise Mr Zakka to bring proceedings against her). Again, the question whether there was a serious possibility of conflict in acting on the First Mortgage Company loan (by reference to the possibility that, without the loan being entered into, a claim might have been made against Ms Rahe) is difficult to assess in circumstances where Permanent's position at that stage is unclear. 89In any event, in circumstances where Mr Zakka now has the benefit of judgments against both Mr and Mrs Rahe in relation to that loan (and it is not asserted that there has been any additional loss by reason of the delay, on that hypothesis, of commencing the proceedings), it is difficult to see that the second basis on which a negligence finding is sought leads anywhere. 90In conclusion, in circumstances where her Honour found that Ms Rahe had explained the risk and the possible consequences of proceeding with the First Mortgage Company loan transaction (and that Mr Zakka understood that advice but decided not to accept it), I consider her Honour did not err in finding that Ms Rahe had satisfied any duty to warn Mr Zakka in relation to the risk that Mr Zakka might lose his home as a result of the October loan transactions. 91However, while I consider it was not unreasonable for Ms Rahe to proceed on the basis that Mr Zakka was already committed to the Alispur loan agreement, and hence that she had no duty to advise in detail as to the nature and effect of that transaction, I think there was a penumbral duty (once she became aware, in reviewing briefly the Alispur loan agreement, of matters that a reasonably competent conveyancing practitioner would have seen as posing risks to the client) to draw to Mr Zakka's attention that he should consider, and perhaps obtain further advice as to whether, the security for that loan would provide adequate protection. This she did not do. (There might in some circumstances also have been a duty to raise with Mr Zakka that he might wish to obtain advice as to whether he was bound to proceed with the Alispur loan, although that would in my view depend on what Mr Zakka's position would have been, if and when the question of adequacy of security was raised, and it is by no means clear that there was such a duty in the present case.) 92Therefore, I consider that Ms Rahe was in breach of a duty of care in the failure to alert Mr Zakka to the prudence of investigating the adequacy of the security for the Alispur loan or of seeking additional security if the unregistered second mortgage was found not to provide adequate protection (although this does not appear to be the basis on which the case was put to her Honour). For the reasons set out below, however, I do not consider that this breach was causative of the loss suffered by Mr Zakka. (ii) Causation of loss 93The third and fourth appeal grounds raise the issue of causation. It is contended that her Honour erred, first, in (having found that Mr Zakka signed the documents for the loan to Alispur prior to consulting Ms Rahe) finding that Mr Zakka was therefore obliged to advance money to Alispur, and in failing to find that the Alispur loan agreement would not be pressed or alternatively was liable to be set aside as an improvident agreement; and, second, erred in finding that it was necessary for Mr Zakka to adduce expert evidence as to whether the Alispur agreement would be pressed or set aside as an improvident agreement. 94It is submitted by Mr Murr that her Honour's finding that any negligence on the part of Ms Rahe did not cause loss to Mr Zakka incorrectly assumed that Mr Zakka was under a legal obligation to advance money to Alispur and that Alispur would have been in a position to commence proceedings (and to prove a loss arising from the breach, or a basis for specific performance) and could defeat any defences raised or cross-claims brought by Mr Zakka. (As noted, her Honour found that at the time Mr Zakka consulted Ms Rahe, he was already committed to the Alispur loan and found that his loss arose from his decision to invest in the Alispur loan.) 95As to the question whether on the evidence her Honour erred in concluding or assuming that Mr Zakka was under a legal obligation to advance money to Alispur, Mr Murr points to the terms of the Alispur loan agreement and notes that there is no provision in that agreement as to when the money is to be advanced, nor any mechanism for making time for that advance of the essence. In this regard, I consider that it was open to her Honour to proceed on the basis that the Alispur loan agreement constituted a binding agreement on the part of Mr Zakka to lend the sum of money there specified to Alispur. It was a formal document, signed by the parties, that, on its face, purported to bind them. In the absence of a specified time at which the money was to be made available to Alispur, an available inference would be that the borrower could call for the money to be advanced on reasonable notice. 96Mr Murr points to that the fact that the Alispur loan agreement is dated 16 October 2003 (some time after Mr Zakka had signed it) and that this was the day before the settlement of the First Mortgage Company loan. It is submitted that this strongly suggests that the operation of the Alispur agreement was contingent on Mr Zakka obtaining the loan from First Mortgage Company. That seems to me to be little more than speculation. It might equally be that the failure to date the document when it was signed was an oversight (or carelessness) and that this was remedied when the loans were being settled. The Alispur loan agreement was not in terms conditional on Mr Zakka obtaining funds to be able to comply with his obligation thereunder. 97Senior Counsel for Mr Elias (Mr Darke SC) submits, and I am inclined to agree, that the urgency impressed by Mr Zakka upon Ms Rahe of returning the documents to Mr Allem or to Mortgage Advisory Services suggests that Mr Zakka considered there was a binding commitment in place (or perhaps, I might add, that he was simply anxious to complete the arrangements by which he thought he would be earning an attractive interest rate on his investment). 98As to the likelihood that Alispur would have "pressed" or sought to enforce the loan agreement, Mr Murr notes that Alispur went into liquidation on 13 December 2004 and that Mr Allem filed a statement of affairs as directed of the company disclosing 40 unsecured creditors owed over $18 million and negligible assets of the company. It is submitted by Mr Murr that it can therefore be inferred that Mr Allem would be unlikely to have wanted to invite comment or scrutiny concerning his financial affairs or those of his company, Alispur, by commencing proceedings against Mr Zakka to enforce the loan agreement. Again that seems to me to be speculation. 99The fact that Alispur is likely already to have been in financial difficulties as at October 2003 might have provided every reason for Mr Allem to have pressed for Mr Zakka to complete the loan agreement. Moreover, the assumption that it would have taken court proceedings for Mr Allem to have done so does not give any recognition to Mr Zakka's obvious desire to proceed with the transaction and his apparent willingness to place trust in Mr Allem. 100As to what would have happened had Mr Zakka not honoured the Alispur agreement and Alispur then sought to enforce the agreement, it is submitted that the contract is not of a kind that would have lent itself to a claim for specific performance (and thus that there was thus no realistic prospect of Alispur enforcing the agreement and receiving the principal sum as opposed to suing for whatever damages it might suffer as a result of the failure of Mr Zakka to comply with the agreement). Hence it is submitted that Alispur would have been unlikely to take proceedings in relation to the agreement. Again, that seems to be speculation on Mr Murr's part. A lawyer advising Mr Zakka of the consequences of not proceeding with the Alispur loan agreement would surely have advised him at least of the risk that he would thereby have been liable to Alispur for damages for breach of contract. 101Her Honour did not err in my view in concluding, on the material before her, that it was likely that Mr Allem would have pressed for Mr Zakka to make payment under the Alispur loan agreement in circumstances where there was evidence that Mr Zakka himself apprehended there to be some urgency in the completion of the arrangements. 102Mr Murr submits that the primary judge's finding on the issue of causation assumes that Mr Zakka would have had no defence (such as misrepresentation) to a claim for enforcement of the Loan Agreement and no basis upon which to seek to set aside the Alispur loan agreement (such as under the Contracts Review Act or as an unconscionable or improvident transaction). 103As to the improvidence of the transaction, it is contended by Mr Murr that Mr Zakka received no benefit either from the First Mortgage Company loan or the on-loan to Alispur. The difficulty with the first proposition is that Mr Zakka clearly obtained the benefit of the discharge (through the proceeds of that loan) of his indebtedness to Permanent. The difficulty with the second is that Ms Rahe's evidence was that Mr Zakka was keen to invest moneys in Mr Allem's business and that he thought he would make money from that loan. The fact that he did not ultimately do so does not mean that at the time he entered into the agreement there was no benefit to him of so doing. Mr Murr disputed that Mr Zakka had sought to obtain a benefit from investment in Mr Allem's business, referring to the following evidence of Mr Zakka:

• that he told Ms Rahe the loan was "for Richard and I wanted the loan between me and him so he could pay me back at [sic] $50,000" (Black 47F);
• that Ms Rahe came to him and told him "I can get the $50,000 back if I use my house, get the 300. I would get the 50,000 back, using my house" (Black 48E);
• that he did not know that the purpose of the loan was for most of the money to be provided to Mr Allem for use in his business (Black 50.14) (though he agreed that he understood there was going to be a loan to Mr Allem (Black 50J));
• that the main reason he went with the deal was because he would get back the $50,000 (Black 50V - Black 51M);
• that he wanted the $50,000 back from Mr Rahe; was promised he would get back the full amount and needed that money back (Black 65N-J).

104However, as already noted, her Honour found that Mr Zakka's evidence was unreliable and should be treated with caution (for the reasons set out at Red 44) and accepted (at Red 58L-O) Ms Rahe's evidence that Mr Zakka said that he was investing in Mr Allem's business. (I note this implicitly rejects the suggestion that Mr Zakka borrowed the money only to recover his $50,000.) 105As to the submission that expert evidence was not required as to the possibility that the Alispur loan agreement might have been not enforceable or the subject of a successful cross-claim (on the basis that the Court was sufficiently equipped to form an opinion about legal practice unaided by expert opinion), Mr Murr relied on Lucantonio v Kleinert [2009] NSWSC 853. There, Brereton J said (at [85]) that, in a case of legal professional negligence "especially one concerning the conduct of a member of the Bar, the Court can reach its own conclusion without the assistance of expert evidence". 106The complaint made by Mr Lucantonio, as summarised by his Honour, was that a competent and prudent barrister should have known that the equity proceedings he had brought could not succeed (and should have advised against their institution). His Honour noted that the conventional test for negligence was whether no qualified barrister in the position of the defendant acting reasonably would have given the advice. (The relevant issue there being considered was whether certain conditions in a contact had the effect of barring any claim for specific performance with compensation.) 107What Brereton J was there considering was whether a competent barrister acting reasonably could have formed the view that a particular claim was untenable. Here, what is being suggested is that her Honour should have formed the view (without the issue having been the subject of a contested hearing on the merits) that a defence or cross-claim based on the improvidence of the transaction or the alleged unconscionability of the transaction would have been made out. An assessment of the prospects of success of such a claim would have to take into account the range of factors that, on a contested hearing, the Court would be required to take into account and the evidence that might be available on such a proceeding. I am by no means convinced that there was sufficient material before her Honour to enable her Honour to make any assessment that the foreshadowed defence/cross-claim would have succeeded. At the most there was a possibility that Mr Zakka might not have been held to the Alispur loan agreement that he had signed or that Mr Allem might not have sought, through his company, to enforce it. 108In any event, the finding by her Honour as to causation seems to me to be correct based on the likelihood that Mr Zakka would have proceeded with the transaction in any event (and the fact that there was nothing to show that any additional security would have been given to him or would have been sufficient to prevent his loss). 109The onus was on Mr Zakka to establish that, had Ms Rahe given the advice or warning that it is said should have been given, the First Mortgage Company loan transaction would not, on the balance of probabilities, have proceeded. Mr Zakka had already decided to lend money to Alispur and had signed a loan agreement to that effect. Mr Zakka expressed some urgency as to the documentation of the loan arrangements. Ms Rahe had advised Mr Zakka more than once that Mr Allem was or might be "a con" and that Mr Zakka risked losing his home. She had gone so far as to advise Mr Zakka (forcefully) that he should not do any deals with Mr Allem. In light of those warnings, Mr Zakka pressed for her assistance in relation to the First Mortgage Company loan. In my view the obvious inference is that Mr Zakka would have proceeded with the First Mortgage Company loan even had Ms Rahe explained more fully the basis on which the Alispur loan was risky and advised as to the steps that could be taken to investigate the security being provided. 110The difficulty with the proposition that loss was suffered by a breach of the duty to warn of, or draw Mr Zakka's attention to, the possibility that the security might prove to be inadequate, is that if someone is so adamant about proceeding with a transaction with someone about whose trustworthiness he is expressly warned, it cannot be assumed that (had particular detail been provided as to the steps that would need to be taken to ensure the adequacy or enforceability of the security being provided by that reportedly untrustworthy person) the party would not have proceeded in any event. A warning not to do any deals with someone about whom it is said that he might be "a con" (coupled with a warning that Mr Zakka could lose his house) is a very strong warning (and one that was expressed in very simple and easily understandable language); yet Mr Zakka proceeded nonetheless with the investment. 111Mr Murr places weight on the fact that her Honour found that, had Ms Rahe given the appropriate advice in relation to the Permanent loan, Mr Zakka would have followed that recommendation as supporting the conclusion that Mr Zakka would have followed advice (had it been given) in relation to the later transactions. However, there are a number of differences in between the two transactions or sets of transactions. 112In relation to the October transactions, unlike the Permanent loan, Mr Zakka had been advised in no uncertain terms not to proceed with the lending; he had signed a document that on its face bound him to advance moneys to Alispur; he had expressed confidence in Mr Allem's integrity; and he was also anxious for the documentation to be signed and returned quickly. This was not a case where there was no loan agreement (as was the case with the Permanent loan) or no security for the loan (again, as was the case with the Permanent loan), albeit that the security was one the adequacy of which was open to question. 113I am not persuaded that, had the risks of an unregistered second mortgage been explained to Mr Zakka, he would have refused to enter into the transaction with First Mortgage Company or would have been able to obtain security from Alispur that would have put him in a better position than that in which he is now. Ms Rahe told Mr Zakka not to enter into the loan transactions; she told him, in effect, that if Alispur defaulted and he could not pay the loan repayments then he would lose his home. Mr Zakka knew that he was unemployed and on a disability pension; he must have realised that he depended on payments from Alispur in order to repay the loan and he was told by Ms Rahe that without those he would not be able to repay the loan and he would lose his house. 114It was open to her Honour to infer from the surrounding circumstances and objective facts that Mr Zakka would have proceeded with the First Mortgage Company transaction even had he been given the advice in question. (Moreover, if as Murr suggests, Mr Allem would readily have provided additional but ultimately worthless security, such as a personal guarantee, then Mr Zakka has suffered no loss by not being advised to seek such security in the first place.) 115It is submitted by Mr Murr that, having regard to Ms Rahe's belief that there was no one else Mr Zakka could get to act for him, had Ms Rahe declined to act it is unlikely that the transactions (there, referring to both parts of the transaction) could have proceeded (citing Dominic v Riz [2009] NSWCA 216 at [94]-[96]). I am not satisfied that Ms Rahe had a duty to cease to act in relation to the First Mortgage Company loan; but even if she did, Ms Rahe's belief that Mr Zakka had no one else to act for him does not establish the likelihood or otherwise that, had she not so acted, Mr Zakka could not have found another solicitor to act for him in relation to the First Mortgage Company loan. There is nothing to support a conclusion that if Ms Rahe had been unwilling to act, Mr Zakka would not have been able to find another solicitor to act for him and would not then have proceeded with the First Mortgage Company loan. (There is no prohibition on a solicitor acting in relation to a transaction that might prove to be improvident.) 116Therefore, I am not satisfied that the primary judge erred in not finding that the loan from First Mortgage Company would not have proceeded but for the negligence on the part of Ms Rahe. I consider that, as her Honour found, the real cause of Mr Zakka's loss was his decision to place trust in Mr Allem and to invest in Mr Allem's business. (iii) Vicarious liability 117The fifth ground of appeal raises the issue of vicarious liability. It is contended that the primary judge erred in finding that Mr Elias was not vicariously liable for the negligence of Ms Rahe. This issue does not strictly arise in relation to the October transactions, given the conclusion I have reached as to Ms Rahe's liability. However, it does arise in relation to the Permanent loan. 118Mr Murr submits that Ms Rahe: was employed as a solicitor by Mr Elias; held a restricted practising certificate which did not entitle her to deal with members of the public other than as an employed solicitor; and performed work for Mr Zakka that was in the nature of work that she was permitted by Mr Elias to do under his supervision (such as obtaining property searches; advising as to necessary documents; communicating with lawyers acting for the other parties to the transactions; preparing and sending requisitions on title; preparing a statutory declaration regarding requisitions; witnessing Mr Zakka's signature on documents, and providing directions for payment on settlements). Mr Murr points to Mr Zakka's evidence that Ms Rahe had given him her work telephone number and that he had contacted her at work (Suppl Blue 288.N) (though her Honour found that he had called Ms Rahe on her mobile number). (He submits that if Mr Elias allowed Ms Rahe to operate a computer to which he, as her employer, did not have access, that does not permit him to argue that Ms Rahe acted outside his authority when she stored information on that part of his computer which was inaccessible to him.) 119Insofar as her Honour found that there was a retainer between Mr Zakka and Ms Rahe, Mr Murr points to authorities in which a retainer with an employed solicitor has been said to be a retainer with that solicitor's employer (referring to Bannister and Legal Practitioners Ordinance 1970 - 1975 ex parte Hartstein (1975) 5 ACTR 100; Knaggs v J A Westawav & Sons Pty Ltd (1996) 40 NSWLR 476; and Kelly v Jowett [2009] NSWCA 278) and submits that whether Mr Elias knew anything of Mr Zakka, or the work done for him, is irrelevant as to the question of vicarious liability. 120In Knaggs v Westaway and Sons Pty Ltd and Kelly v Jowett, however, the issue before the Court related to whether costs orders should be made personally against the employed solicitor; not whether the work in question was in the course of employment. 121Mr Murr also placed weight on the restriction on the terms of Ms Rahe's practising certificate (i.e. the condition that precluded Ms Rahe from undertaking legal work except in her capacity as an employed solicitor). 122Section 4 of the Legal Profession Act 2004 (NSW) relevantly defines a solicitor as "a local legal practitioner who holds a current local practising certificate to practise as a solicitor and barrister". Section 49 of that Act provides that "[a] local practising certificate is subject to ... any conditions imposed by the appropriate Council". Section 53 of the Act provides that it is a statutory condition of a local practising certificate for a solicitor that, until the holder has completed practical legal training in compliance with that section (under the supervision of an Australian legal practitioner or otherwise as provided for under the section) for the stipulated period, the solicitor must engage only in supervised legal practice. Section 58 of that Act provides for the consequence of non-compliance with conditions imposed on practice by a local practising certificate. None of those provisions has the effect that any conduct by the holder of such a certificate must be deemed to be conduct in the course of employment (indeed the fact that the Act contemplates that there might be non-compliance with conditions of this kind suggests otherwise). 123In the present case, Ms Rahe's local practising certificate (Blue 38-9) was subject to Condition B, which provided, relevantly, that Ms Rahe was entitled to practise as an employed solicitor in private practice "and not entitled to practise as a partner of a firm or on her own account". (Interestingly, the equivalent condition on current practicing certificates refers to an entitlement "to engage in legal practice as a solicitor in the course of employment by: a law practice".) 124Mr Murr submits that the fact that Ms Rahe held a restricted practising certificate supports a conclusion of ostensible authority, on the basis that there was no possibility that Ms Rahe could properly do the work other than in the capacity as employed solicitor. I have difficulty with both aspects inherent in that proposition. First, the employment of a solicitor involves no holding out as to whether that solicitor has a restricted or unrestricted practising certificate. At most it is a representation that the solicitor holds a practising certificate to permit the solicitor to carry out legal services. Hence, the argument based on ostensible authority takes the matter no further at that point. Second, the suggestion that a restriction placed on a practising certificate means that there is "no possibility" of the solicitor practising otherwise than in observance within that restriction ignores the obvious possibility that the solicitor might contravene that restriction knowingly or otherwise. 125Insofar as reference was made by Mr Murr to the use of Mr Elias's facilities, letterhead and provision of Mr Elias's telephone and fax numbers to others including solicitors acting for other parties to the transactions also indicate ostensible authority. While this might amount to a holding out to the other parties to the transaction, it does not support a conclusion of any holding out to Mr Zakka that the services were being provided on behalf of Mr Elias or with his authority. 126The test as to when vicarious liability will arise (albeit there in the case of intentional torts) was considered in Lepore. It turns on whether there is the requisite closeness of connection between what the employee was employed to do, or was held out by the employer as employed to do, and the wrongful conduct (see Allsop P, as his Honour then was, in Withyman v State of New South Wales [2013] NSWCA 10). 127Her Honour held that Mr Elias was not vicariously liable for the acts of Ms Rahe on the basis that her acts were not in the course of her employment or in pursuit of her employer's interests or intended performance of her contract of employment. Nor did she act in ostensible pursuit of the employer's business or the apparent execution of the authority which the employer held her out as having. 128In so doing, her Honour adopted the language used by Gummow and Hayne JJ in Lepore. Their Honours there (at [239]), concluded that: For present purposes, it is enough to conclude that when an employer is alleged to be vicariously liable for the intentional tort of an employee, recovery against the employer on that basis should not be extended beyond the two kinds of case identified by Dixon J in Deatons: first, where the conduct of which complaint is made was done in the intended pursuit of the employer's interests or in the intended performance of the contract of employment or, secondly, where the conduct of which complaint is made was done in the ostensible pursuit of the employer's business or the apparent execution of the authority which the employer held out the employee as having. 129Mr Murr submitted that her Honour had applied the wrong test and drew attention to the formulation by Gleeson CJ in the same case. 130Reliance was placed by Mr Murr on various authorities in which an employer has been held vicariously liable for wrongful conduct of an employee notwithstanding that the conduct in question had been in breach of a prohibition by the employer (such as Ffrench v Sestili [2007] SASC 241; Limpus v London General Omnibus Co (1862) 1 H & C 526; and Black Range Tin v Shoobert [1973] WAR 131). 131It is submitted by Mr Murr that the only prohibitions that Mr Elias would have placed on Ms Rahe acting for Mr Zakka concerned whether he, Mr Elias, would have been paid for the work done by Ms Rahe and that he would otherwise have known and approved of Ms Rahe accepting the client and opening the file. That is not the thrust of Mr Elias' evidence. Mr Elias' evidence (which was accepted by her Honour) was that he would not have consented to this. He denied that he would have had no problem with Ms Rahe helping out her brother at no cost; first, because he said he was "not a charity" and, second, because he said he knew he had to supervise everything (Black 101P). 132For Mr Elias, a distinction is sought to be drawn between a prohibition on the manner of carrying out an act in the course of employment and a prohibition taking the act outside the course of employment altogether. The fundamental point raised by Mr Elias is that the conduct in question of Ms Rahe was not in the scope of her employment because she was only employed to assist Mr Elias on matters for his clients or on matters in respect of which he had consented to the acceptance of instructions. 133Mr Darke emphasised the findings by her Honour that Mr Zakka only met with Ms Rahe at her home, outside of business hours (Red 48F); called Ms Rahe on her mobile phone (Red 48G and 53N); did not remember receiving any letters from Ms Rahe (Red 53R); and, although he knew that Ms Rahe worked in Bankstown had not heard of Mr Elias until he saw lawyers in relation to bringing his proceedings (Red 53S). Mr Darke referred to what was said by Isaacs J in Bugge v Brown [1919] 26 CLR 110 at p 116 (and see Hollis v Vabu Pty Limited (2001) 207 CLR 21 at [38]). Relevantly, in Bugge, his Honour said that : ... the law recognizes that it is equally unjust to make the master responsible for every act which the servant chooses to do. The limit of the rule - expressed in the widest form by the phrase "the course of the employment" or "the sphere of the employment" - is when the servant so acts as to be in effect a stranger in relation to his employer with respect to the act he has committed, so that the act is in law the unauthorized act of a stranger (Turberville v Stampe ; Cheshire v Bailey; Black v. Christchurch Finance Co.). [footnotes omitted]. This is the root of the matter. (my emphasis) ... The act of the servant complained of is regarded as outside the relation [of master, who had selected the servant, could remove the servant for misconduct and whose orders the servant was bound to receive and obey, to the wrongdoer], and as that of a stranger: (a) if he did not assume to act within the scope of his employment (Hutchins v London County Council; Highley's Case; Limpus's Case); or (b) if what he did was a thing so remote from his duty as to be altogether outside of, and unconnected with, his employment (Barnes v. Nunnery Colliery Co); Black v. Christchurch Finance Co.; Harding's Case; Weighill's Case). 134Mr Darke submits that in the present case Ms Rahe acted so as to be, in effect, a stranger in relation to her employer with respect to the assistance she gave Mr Zakka. I agree. In Re Bannister; Ex parte Hartstein (1975) 5 ACTR 100 at 111, Fox J gave (as an example of circumstances where someone is not acting as a servant) the example of a solicitor might have a right of private practice as a term of his contract of service. Here, Ms Rahe had no right of private practice but acted, vis a vis Mr Elias, as if she had. 135In Lepore, Gummow and Hayne JJ at [232], said: What unites those elements is the identification of what the employee is actually employed to do or is held out by the employer as being employed to do. It is the identification of what the employee was actually employed to do and held out as being employed to do that is central to any inquiry about course of employment. ... in Lloyd, the determinative finding was ...that the fraudulent clerk was authorised by his employer to act for the firm in a class of matters including the conveyancing transactions which Emily Lloyd instructed him to effect. At trial Scrutton J had found that it was within the scope of the clerk's employment to advise clients like Mrs Lloyd who came to the firm to sell property "as to the best legal way to do it, and the necessary documents to execute". The fraud was held to have been committed in the course of that employment. (my emphasis) 136At [45], in Lepore, Gleeson CJ noted that the rationale of vicarious responsibility in the case of an employee committing unauthorised acts was that the employer, having put the employee in the place of the employer to do a certain class of acts, must be answerable for the manner in which that agent has conducted himself in doing the business of the employer and, at [46], that if the clerk had assaulted the client, or stolen money from her purse, a different result would have followed since in neither of those cases would the clerk have been undertaking duties imposed on him by the nature of his employer's business and the nature of his employment. His Honour said that in such a case the clerk's act would have been an "an 'independent' act, of which no more could be said than that the employment created the opportunity for the wrongdoing". 137Here, the fact that Ms Rahe was employed by Mr Elias gave her the opportunity to engage in the conduct she did only in the sense that she was able to use the letterhead of the firm to correspond with the other party's solicitors. This was not a case where someone such as Mr Zakka had approached the firm for assistance and there consulted with Ms Rahe. 138In Withyman, Allsop P, as his Honour then was, referred to the passage from Gleeson CJ's judgment in Lepore, noting (at [135]) that "[u]nauthorised acts will found vicarious liability if they may be regarded as modes (although improper modes) of carrying out employment duties; but if the act is unconnected with the authorised act it may be independent". His Honour went on to refer to the difficulty recognised by Gleeson CJ where the authorised acts were defined with a degree of generality. 139It is submitted for Mr Elias that this is a case where the employee engaged in a "frolic" of her own (referring by way of example to Harvey & Anor v State of NSW [2006] NSWSC 1046 at [239]-[240]). I agree. Ms Rahe was not acting in intended pursuit of Mr Elias' interests or in intended performance of her work as an employee in the present case. The fact that some of the types of tasks performed by Ms Rahe for Mr Zakka were of a nature that she might perform during her employment on client files for the firm is not sufficient in my view to bring what she did within the scope of her employment. 140Mr Zakka did not in any relevant sense come to Mr Elias' firm for assistance (as Mrs Lloyd had done in Lloyd v Grace). Rather, in the context of a family relationship, he sought and obtained the personal (and gratuitous) assistance of Ms Rahe, outside the firm, as a favour to him. He was not in any practical sense benefiting from the services of Mr Elias and he knew or ought to have known that the firm was not being engaged in any formal sense. 141True it is, that the conveyancing steps taken by Ms Rahe were steps of the kind that she was authorised to take in matters conducted by the firm or for Mr Elias' clients and she (without authorisation) made use of the firm's facilities in assisting Mr Zakka. However, her employment by Mr Elias was fortuitous in the sense that he had done nothing to place Ms Rahe in the position vis a vis Mr Zakka to commit the wrongful act other than to employ her as a solicitor (thus giving her the opportunity to misuse the firm's facilities when acting on Mr Zakka's matter). 142This, in my view, is a clear case of a solicitor engaging in a frolic of her own or at her own whim, to adopt the terminology used in the authorities. It is not an unauthorised mode of committing an unauthorised act. It is an act Ms Rahe was not authorised to take as an employed solicitor of the firm. There was not, in my opinion, a sufficient connection between that unauthorised conduct and Ms Rahe's employment to bring this within the scope of the doctrine of vicarious liability as explained in Lepore and Withyman. The fact is that Ms Rahe deliberately acted in such a manner as to prevent such a connection. 143Accordingly, her Honour did not err in dismissing the claims for vicarious liability against Mr Elias.

Conclusion 144For the reasons above, in my opinion the appeal should be dismissed with costs. 145EMMETT JA: This appeal arises out of loans made by the appellant, Mr Victor Zakka, totalling $300,000, which he has not been able to recover. In order to make the loans, Mr Zakka borrowed the sum of $304,000 on the security of a mortgage of his home. When he was unable to recover the loans that he had made, he was unable to repay his borrowing. As a consequence, his home was sold by the mortgagee exercising its power of sale, in order to repay the loan of $304,000. 146Mr Zakka complains that the respondents, Mr George Elias, a solicitor, and Ms Delilah Rahe, a solicitor employed by Mr Elias, should be held responsible for his loss. He sued Mr Elias and Ms Rahe in the District Court but was unsuccessful in relation to most of his claims concerning the loss of his home. He has now appealed to the Court of Appeal. 147From April 2003, Ms Rahe held a restricted practising certificate and was employed by Mr Elias in his sole practice as a solicitor. Ms Rahe was entitled to practise as an employed solicitor in private practice, but not as a partner of a firm or on her own account. 148Ms Rahe and Mr Zakka are distantly related. Ms Rahe was consulted by Mr Zakka in a family and social context to assist him in relation to the transactions that have given rise to the dispute between the parties. 149In June 2003, Mr Zakka borrowed the sum of $50,000 from Permanent Trustee Australia Limited (Permanent Trustee) and lent that sum to Mr Richard Rahe, Ms Rahe's brother. Ms Rahe assisted Mr Zakka in connection with those transactions. 150In October 2003, Mr Zakka borrowed the sum of $304,000 from First Mortage Company Home Loans Pty Limited (First Mortgage) on the security of a mortgage over his home. Mr Zakka applied that sum:

• as to $50,000 in repaying his borrowing from Permanent Trustee;
• as to $250,000 by way of loan to Alispur Pty Limited (Alispur); and
• as to the balance in costs and expenses relating to the borrowing. Ms Rahe assisted Mr Zakka in connection with those transactions. The extent of her assistance is the subject of Mr Zakka's complaints. 151Mr Rahe did not repay the sum of $50,000 lent to him by Mr Zakka and Alispur has not repaid the sum of $250,000 lent to it by Mr Zakka. As a consequence, Mr Zakka was unable to repay the sum of $304,000 borrowed from First Mortgage. First Mortgage therefore exercised the power of sale conferred by the mortgage given to it by Mr Zakka to secure the repayment of the sum of $304,000. 152In the proceeding in the District Court, Mr Rahe was a defendant, together with Mr Elias and Ms Rahe. Mr Zakka sought to recover the loan of $50,000 from Mr Rahe. He was successful in that claim and judgment was entered in his favour in the District Court against Mr Rahe. He also sought to recover from Mr Elias and Ms Rahe the sum of $304,000 on the basis that each of them had been in breach of a duty owed to him. He was successful in relation to the sum of $50,000 against Ms Rahe in respect of the loan to her brother. However, he was unsuccessful in his claim against Ms Rahe as to the balance and was wholly unsuccessful in his claim against Mr Elias. 153In the appeal, Mr Zakka contended that the primary judge erred in a number of respects. He says that her Honour should have found that:
• Ms Rahe owed a duty of care to him as a result of her agreeing to assist him in relation to the loan from First Mortgage;
• Ms Rahe failed to advise him adequately as to the risks of lending the sum of $250,000 to Alispur;
• He suffered loss as a result of negligence on the part of Ms Rahe in relation to the transactions with First Mortgage and Alispur; and
• Mr Elias was vicariously responsible for the actions of Ms Rahe. 154In the appeal, Ms Rahe filed a submitting appearance except as to costs. She did not participate in the appeal. Mr Elias disputed all of the contentions advanced on behalf of Mr Zakka. His primary position was that, in the circumstances, he had no vicarious responsibility for the actions of Ms Rahe complained of by Mr Zakka. However, Mr Elias also disputed the contentions advanced on behalf of Mr Zakka that Ms Rahe owed a duty of care to Mr Zakka, that she had failed to discharge that duty and that Mr Zakka's loss resulted from that failure. 155I have had the advantage of reading the reasons of Ward JA in draft form. I agree with her Honour's conclusions that the appeal should be dismissed for the reasons given by her Honour. 156In particular, I agree with her Honour's conclusion that there was no error on the part of the primary judge in concluding that there was no assumption of responsibility by Ms Rahe in relation to Mr Zakka's proposed loan to Alispur. Nevertheless, having accepted responsibility in relation to the proposed borrowing from First Mortgage, Ms Rahe came under an obligation to Mr Zakka to advise him concerning the risks involved in lending to Alispur on the basis proposed, namely, on the security of an unregistered second mortgage, without taking steps to ascertain the value of the property that was to be the subject of the second mortgage and the amount secured by the prior mortgage. By failing to advise Mr Zakka of the prudence of making such inquiries, Ms Rahe did not discharge the duty to which she became subject by reason of her involvement with Mr Zakka. 157I also agree with the conclusions of Ward JA that there was no error on the part of the primary judge in concluding that, even if the risks of relying on the security of an unregistered second mortgage had been explained to Mr Zakka, he would not have refused to proceed with the transaction, including the loan to Alispur. Ms Rahe in fact told Mr Zakka not to enter into the transactions and warned him that, if Alispur defaulted and he could not repay the loan from First Mortgage, he would lose his home. It was open to the primary judge to draw the inference, in all of the circumstances, that Mr Zakka would have proceeded with the transactions even if he had been given appropriate advice by Ms Rahe and would have proceeded to make the loan to Alispur. The real cause of the loss suffered by Mr Zakka was his preparedness to place trust in Mr Louis Allem, the principal of Alispur. 158Finally, I also agree with the conclusions of Ward JA that Mr Elias was not vicariously liable for the actions of Ms Rahe in relation to any of the transactions. The conduct about which Mr Zakka complained was not done in the intended pursuit of the interests of Mr Elias or in the intended performance of her employment by Mr Elias. Further, the conduct about which Mr Zakka complains was not done in the ostensible pursuit of the business of Mr Elias or in the apparent execution of any authority that Mr Elias held Ms Rahe out as having. The actions of Ms Rahe about which Mr Zakka complains were not undertaken by her within the scope of her employment because she was only employed to assist Mr Elias on matters for his clients or on matters for which he had consented to the acceptance of instructions. Mr Zakka did not in any sense come to Mr Elias for assistance. He sought and obtained assistance from Ms Rahe as a relative and as a favour to him. Indeed, Ms Rahe took steps to ensure that her acting for Mr Zakka would not come to the attention of Mr Elias. There can be no doubt that her actions had nothing to do with Mr Elias. 159Accordingly, I agree that the appeal should be dismissed with costs. 160TOBIAS AJA: I agree with the orders proposed by Ward JA for the reasons that she has expressed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 May 2013