Secured Lending 1 Pty Ltd v Mahmassani

1. [1]

   Secured Lending 1 Pty Limited, the plaintiff, commenced proceedings seeking judgment for the possession of land at 168 South Street, Rydalmere pursuant to a loan agreement and mortgage dated 26 September 2018. The borrower was a company called Menara Traders Pty Ltd. The defendants, who were the directors of the company, were guarantors of the loan and the mortgagors. The loan of $750,000 was for a three month period expiring 26 December 2018. On that day the loan was not repaid. After service of a notice under s 57 of the Real Property Act 1900 (NSW) on 8 January 2019, which was not complied with, the present proceedings commenced on 1 March 2019.

2. [2]

   A defence was filed on 18 April 2019. That defence put all matters in the statement of claim in issue except the fact that the defendants were the registered proprietors of the land. In addition, the defence pleaded a reliance on the Contracts Review Act 1980 (NSW), and asserted unconscionable conduct on the part of the plaintiff.

3. [3]

   On 4 July 2019 the defendants filed a cross-claim against a solicitor and the firm for whom he worked, a broker and the firm for whom he worked, and against the plaintiff. An amended cross-claim was filed on 14 January 2020 making only minor amendments to the original cross-claim. References to the “cross-claim” hereafter are references to the amended cross-claim.

4. [4]

   The proceedings ultimately settled as between the plaintiff and the defendants, including the cross-claim brought against the plaintiff, and as between the defendants and the broker and his company. The only claim ultimately litigated, and with which this judgment is concerned, is the claim by the defendants against the solicitor and his firm. There was no challenge by the solicitor to the appropriateness of the compromise between the plaintiff and the defendants. I shall hereafter refer to the defendants as the cross-claimants.

5. [5]

   The substance of the claim against the solicitor and his firm (who I shall simply refer to as “the solicitor”) is that the solicitor failed to explain a number of aspects about the loan agreement and mortgage to them despite executing a certificate asserting that he had done so. The cross-claim pleads a number of causes of action against the solicitor; misrepresentation, misleading and deceptive conduct, negligence, and a claim based on unconscionable and unconscientious conduct.

6. [6]

   The background to the loan is this. The cross-claimants, Khaled and Ghada Mahmassani, a husband and wife, who were born in Lebanon, were asked by their son, Bilal, to help him out because he owed money to various people. Bilal told his mother, and subsequently his father, that some men had arrived at his house demanding money from him. He had apparently invested money for them as part of his Forex Trading and the investment had been unsuccessful and the money was lost. The evidence was that the men were standing over Bilal and his wife, making threats against them if Bilal did not pay them the money they had invested through him.

7. [7]

   Prior to speaking with his parents, Bilal decided that he would have to try to borrow funds using his parents’ home as security. He was put in touch with a broker, Kadir Ilgun, who ran a broking firm called The Finance and Property Specialists Pty Limited.

8. [8]

   Two men, Khalid El Chami and Ghazi Zreika (who I shall call “the investors”), came to the cross-claimants’ house. They claimed to be friends of Bilal, and said they were trying to help him. They said to the cross-claimants that if they (the cross-claimants) mortgaged their house they could give the money to them, the investors. The investors said that they would pay the cross-claimants back after three months, and they (the investors) would pay the interest that was payable in respect of the loan. The cross-claimants had a number of meetings with the investors at their own house and at Bilal’s house.

9. [9]

   On about 19 September 2018, Bilal registered the company Menara Traders Pty Limited. He made his parents the directors and shareholders. He did not tell them he had done this, and they did not find out until at least a few days later.

Meeting on 21 September 2018

1. [10]

   The cross-claimants assert that a meeting was arranged at the solicitor’s office in Egerton Street, Silverwater on 21 September 2018. The solicitor’s offices were in the same building occupied by the broker. Present at this meeting were the broker, the solicitor, the investors, the cross-claimants and Bilal. The cross-claimants had never met either the broker or the solicitor, or spoken to them before that time.

2. [11]

   The cross-claimants say that they were told to bring the certificate of title to the property with them to the meeting, and they did so.

3. [12]

   The cross-claimants’ account of the meeting is as follows. One of the investors addressed the solicitor and the broker and said words to the effect:

4. [13]

   Mr Mahmassani then said to the solicitor:

5. [14]

   One of the investors said words to the effect:

6. [15]

   A contract of sale was put in front of Bilal. Mrs Mahmassani said:

7. [16]

   Mrs Mahmassani said that she felt a lot of pressure and she was afraid they would kill Bilal. She said she felt forced and didn’t feel like she had a choice. She said she believed that they (the investors) would pay the money back.

8. [17]

   The broker then asked for the certificate of title and Mr Mahmassani gave it to him.

9. [18]

   The solicitor then said to Mr Mahmassani, “Read the documents and sign here”. Mr Mahmassani signed the documents. He then said to Mrs Mahmassani, “Sign here” and she signed them. She said that she did not read English. Her husband did read English and she said she trusted him 100%. She said that he did not read the documents on that day because they were not given enough time to do so. She said the meeting took only about half an hour. Mr Mahmassani said he was asked to sign one document, and he felt pressured to sign it.

10. [19]

    The solicitor’s account of the meeting was somewhat different.

11. [20]

    The solicitor said that when he returned from Friday prayers at about 2:00pm he saw people sitting in the reception area of his office. At the time, he did not know who they were. He went to his office to resume his work. About 30 minutes later, the broker came into his office and said words to the effect:

12. [21]

    The solicitor went to the boardroom. He said that the two persons who were to become his clients were present with their son Bilal, the broker and two other men who he came to know were Ghazi Zreika and Khaled El Chami.

13. [22]

    The solicitor said that the following conversation ensued:

14. [23]

    Mr Mahmassani then said that the investors were like his sons, and anything could be said in front of them. The solicitor asked if Mr Mahmassani intended to sell the house to his son and if he would like the solicitor to act for him. Mr Mahmassani replied:

15. [24]

    The solicitor then said he would get a copy of the contract for them to look at, and asked if he wanted to do that with everyone in the room. Mr Mahmassani said he did.

16. [25]

    Bilal then asked if contracts could be exchanged that day because the money was needed urgently. The solicitor said that he would only exchange contracts if Bilal sought independent legal advice. He said Bilal would also need to provide a 10% bank cheque and a s 66W certificate. He said he was unable to act for both Bilal and his parents because there was a conflict of interest. The broker indicated that he could get Safa to act for Bilal. (Safa Harris was another solicitor known to the broker.) The broker also said that the cross-claimants did not have a solicitor to act for them, and asked if the solicitor would act. The solicitor asked them if they wanted him to act, to which Mr Mahmassani responded:

17. [26]

    The solicitor recalled that he took steps to verify the cross-claimants’ identity. He said it was his usual practice to provide a copy of the contract to clients for them to read and review while he explained it to them, and he believed he did that on this occasion. He also said it was his usual practice when meeting with Arabic speaking clients to read the contract terms in English and then explain to them in Arabic. He said that he believed he adopted that course on that occasion. He said that based on his discussions with them on that day he formed the belief that both of them spoke and understood spoken English.

18. [27]

    When he had finished reviewing the contract he told them that he would be happy to act for them if they chose to sell their property. He said that he did not know how it came to be raised, but the broker had a document entitled “Indicative letter of offer” from Secured Lending. He said he did not recall reviewing that letter or discussing its terms with the cross-claimants at the meeting because he had not seen it previously. He told them that he was prepared to be the solicitor nominated at the end of that letter to act for the cross-claimants.

19. [28]

    The solicitor denied gesturing or saying words to the effect “for both of you” to mean that he was acting for the cross-claimants and the investors. He said he did not hand any document to Mr Mahmassani for signature, and he did not see the CT at the meeting. He recalled that the letter of offer was signed at the meeting.

20. [29]

    Notwithstanding the difference in the accounts of the meeting, the evidence is clear that only two documents were signed at that meeting. The first was a contract of sale from the cross-claimants to Bilal which was signed only by Bilal. The second was the indicative letter of offer which was signed by the cross-claimants.

21. [30]

    On 25 September 2018 the investors came to the cross-claimants’ home. They drove them to the Commonwealth Bank of Australia at Paramatta. Mr Zreika said, “My cousin works in the bank at Parramatta, so he can help me. We will open a company bank account”. Mr Mahmassani remembers that he was asked to show his driver’s licence to open the account. While they were at the Bank Mrs Mahmassani said that Mr El Chami said, “I will not touch the money unless Khaled [Mr Mahmassani] is with me”.

Meeting on 26 September 2018

1. [31]

   On 26 September 2018, the investors arrived at the cross-claimants’ house and told them they had to go back to the solicitor to sign more documents. They said Bilal was not to accompany them. The investors drove them to the office where they had met the solicitor and the broker on 21 September. Mrs Mahmassani said that the solicitor, the broker and the investors talked, and her husband listened. She said she did not understand when they talked. They asked “Did you bring your passports?” and her husband said they did not.

2. [32]

   Mr Mahmassani said that at the meeting the solicitor brought out a big bundle of papers. He gave a brief explanation, reading through the papers very fast. Mr Mahmassani recalled that the solicitor said words to the effect that the loan had to be repaid, that it was for three months and that it could be extended for a further three months. He did not recall the solicitor saying that the house could be sold if it was not paid back.

3. [33]

   He said that he and his wife were handed a number of documents and were told “Read these and sign each page”. He said he did not have his reading glasses and did not read the documents properly. Mrs Mahmassani said that the solicitor placed a number of documents in front of her husband and said “Look, you have to sign here and here” and he pointed to open documents. There were no “stickies” on the documents; rather, the documents were open where they had to sign. Her husband signed them, and then the solicitor told her to sign them and pointed to where she had to sign. She did so.

4. [34]

   Mrs Mahmassani said that the solicitor, the broker and the investors left the room while she and her husband waited in the office for them. When they returned, the solicitor said that they had to come back the next day to bring their passports. She said the meeting took only about 20 to 30 minutes. The investors then drove them home. She recalled the solicitor saying words to the effect, “We will give you the money for three months, then give you another three months to repay it, so six months.”

5. [35]

   The solicitor’s account of this meeting was as follows.

6. [36]

   Late in the morning of 26 September the solicitor said that he received from Summer Lawyers, the plaintiff’s solicitor, a letter with a number of loan documents. He said he reviewed the loan documents on his computer and then sent them to the receptionist for printing.

7. [37]

   He said a meeting had been arranged by the broker at 3:00pm on that day. When he entered the boardroom he saw the cross-claimants and one of the investors – the solicitor now cannot recall which of them was present. The solicitor addressed the cross-claimants and told them that he was only expecting them. He said he was not comfortable with having a third person at the meeting. Mr Mahmassani said that they would prefer that the other man remained in the room, but the solicitor refused and ordered the man out of the room. He left the room.

8. [38]

   The solicitor said that at the outset of the meeting he verified the cross-claimant’s identity by sighting their passports, Medicare cards and some other cards. He said he took a photo of Mr Mahmassani holding his driver’s licence and mobility parking scheme and a photo of Mrs Mahmassani holding her photo card and passport. He then said he spent approximately three hours with the cross-claimants reviewing and executing the loan documents. He said he spoke to them in both Arabic and English. He said, contrary to what Mr Mahmassani had said, that Mr Mahmassani was wearing his reading glasses.

9. [39]

   The solicitor then said words to the effect:

10. [40]

    The solicitor then went through the various fees associated with the loan including a rollover fee if they requested to extend the repayment date. He then detailed the interest and the default interest that was charged.

11. [41]

    The solicitor then said:

12. [42]

    Mr Mahmassani said:

13. [43]

    During the discussion Mr Mahmassani raised the fact that the interest rate was very high. The solicitor explained that that was because it was a private loan. Mr Mahmassani said he knew that, because they had taken out a private loan previously with a lower interest rate. Mr Mahmassani suggested that perhaps they could negotiate it. The solicitor said he did not negotiate the rate, and that his job was only to advise them on what they had. He said they would need to speak to the broker or the lender if they wanted to negotiate the rate. He said they did not have to take the finance if they didn’t want to pay such high interest.

14. [44]

    The conversation continued:

15. [45]

    The solicitor then said that the decision was one for them to make. He said he had explained the documents and it was a matter for them if they wanted to proceed or to try to negotiate the terms further. Mr Mahmassani said they wanted to proceed, and that they had received financial advice from an accountant who had advised that the loan and sale wouldn’t affect their pension. He asked the solicitor if this was correct. The solicitor said he could not give them financial advice. He said to them:

Subsequent events

1. [46]

   The cross-claimants claim that on the following day, 27 September, the investors again came to their house. The cross-claimants say that they followed the investors in their own car to the solicitor’s office, with their passports. When they arrived, the solicitor took photographs of them with their passports in the boardroom.

2. [47]

   The solicitor said that the cross-claimants dropped the CT at his office either on 26 September or on the morning of 27 September. He denied that he asked the cross-claimants to return to his office on 27 September with their passports because they had brought them on 26 September.

3. [48]

   On 28 September, Mr Mahmassani went with the investors to the CBA at Ermington. He said that when the investors had visited him at his home prior to 21 September, they had said they would just use $100,000 per month and invest it. However, on 28 September they told him to withdraw all the money that had been transferred to the Menara Traders Account. Mr El Chami said words to the effect:

4. [49]

   Mr Mahmassani said he signed papers, and he believed that the money was deposited into a CBA account of Mr El Chami.

5. [50]

   Mr Mahmassani said that some time later he went back to the CBA and asked them if there was any money left in the Menara Traders account. He was told that there was no money in that account.

6. [51]

   It will be necessary to examine this evidence to determine what is most likely to have occurred at the meetings of 21 and 26 September. It is clear from the case brought by the cross-claimants, that the 26 September meeting is the significant one because it was only on that occasion that the cross-claimants committed themselves to the loan and mortgage arrangement.

7. [52]

   Before examining the surrounding evidence, it is necessary to say something about the broker and his absence from the hearing.

The broker

1. [53]

   The broker had sworn an affidavit on 5 June 2020 when he was a cross-defendant. The broker was present at the meeting on 21 September 2018 and was asserted by the cross-claimants to have been present on 26 September.

2. [54]

   An issue arose about whether the broker was in the camp of the solicitor, leading to a conclusion that the failure by the solicitor to call the broker might result in a Jones v Dunkel inference.

3. [55]

   In RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56, McColl JA (with whom Emmett JA with added reasons and Sackville AJA agreed) said:

4. [56]

   It transpired that those acting for the solicitor had in fact served a subpoena to give evidence on the broker. The subpoena was served on 8 March 2021 with a covering letter explaining what the broker had to do. On 12 March the solicitors wrote again to the broker informing him of the court in which the matter would be heard and sitting times. They reminded him that a failure to attend without a lawful excuse was a contempt of court.

5. [57]

   On Sunday 14 March at 10:04pm the broker sent an email to the solicitor’s lawyer attaching a so-called medical certificate from a chiropractor indicating that he was unfit to attend at court on Monday, 15 March. A similar certificate was emailed to the Court. The email from the broker to the solicitor’s lawyer concluded by saying:

6. [58]

   That afternoon the lawyers for the solicitor sent an email to the broker noting receipt of his email and medical certificate, and pointing out that the subpoena required his attendance on every day that the proceedings were listed for trial. They said he was required to attend the following day. There was evidence that that email was read by the broker. The broker then sent a further email on that day saying he would send another medical certificate for the Tuesday, and pointed out that he had his own matter in Court the following day. The solicitor’s lawyers responded by pointing out that the matter he had in Court was only a directions hearing before the Registrar, which would not prevent him attending in the present matter pursuant to the subpoena. Thereafter, the correspondence ceased. The broker did not attend at any time.

7. [59]

   On the assumption that the broker was in the solicitor’s camp, counsel for the plaintiffs submitted that an application ought to have been made by Wednesday to have the broker arrested and brought to Court. Senior counsel for the solicitor submitted that his instructing solicitors had done everything they could to bring the broker to Court.

8. [60]

   In the first place, I do not consider that any conclusion should be reached that the broker was in the solicitor’s camp simply because the solicitor’s lawyers had subpoenaed the broker to attend to give evidence. Indeed, the fact that it was necessary for the solicitor’s lawyers to subpoena the broker might be an indication to the contrary.

9. [61]

   On the other hand, a broker is ordinarily considered to be the agent of the borrower (Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 308; ANZ Banking Group Ltd v Bragg (No 3) [2017] NSWSC 208 at [47]-[49]), and in that way it might be asserted that the broker was more likely in the camp of the cross-claimants. A matter telling against that is the fact that the cross-claimants brought a cross-claim against the broker. However, that claim was settled, and an inference might be available that, in such circumstances, the broker would give evidence on behalf of the cross-claimants. Further, the cross-claimants had the onus of proof of showing that the solicitor did not adequately advise them and it was, therefore, relevant to have regard to their ability to adduce evidence on issues where the broker could shed light: RHG v Ianni at [77].

10. [62]

    When all of these matters are balanced, I do not consider that the broker can be regarded as having been either in the camp of the cross-claimants or of the solicitor. There can be little doubt that the evidence from the broker is likely to have clarified some issues in dispute. I do not, however, consider that the broker should be regarded as having been in the camp of the solicitor, so that the failure of the solicitor’s lawyers to have the broker arrested for failing to comply with the subpoena can result in an inference that the broker’s evidence would not have assisted the solicitor. To use a term taken from the criminal law (Meakin v R [2018] NSWCCA 288 at [136]), the position of the broker here was intractably neutral.

The cross-claimants’ case

1. [63]

   The parties agreed that the documents contained in the exhibit to the broker’s affidavit should be received in evidence, but the affidavit was not read, and I have had no regard to it.

2. [64]

   The case that was run against the solicitor differed very considerably from the case which was pleaded against him in the cross-claim. In the cross-claim it was pleaded that the solicitor was actually the solicitor for the lenders, but he misrepresented to the cross-claimants that he was acting for them. It was pleaded that he was responsible for the cross-claimants entering into the loan arrangement because he did not ensure that they were given independent legal advice by another solicitor. It was pleaded that the solicitor engaged in unconscionable and unconscientious conduct towards the cross-claimants which resulted in them executing the loan documents. Somewhat inconsistently, it was alleged that the solicitor was their agent in dealing with the plaintiff.

3. [65]

   Notwithstanding the evidence which was filed by the plaintiff and the other parties, demonstrating beyond doubt that the plaintiff had Summer Lawyers acting for it, and that those lawyers regarded the solicitor as acting for the cross-claimants, those acting for the cross-claimants continued to pursue this line in written submissions filed immediately before the hearing in March 2021, namely, that the solicitor was not the solicitor for the cross-claimants, and that they did not receive independent legal advice from another solicitor. This case was, however, abandoned by the time of oral submissions.

4. [66]

   Further, notwithstanding the evidence filed on behalf of the solicitor that he had properly verified the identities of the cross-claimants by viewing various identification documents, including photos of them with their identification documents, the cross-claimants maintained that the solicitor had failed to verify their identities, although there was in fact no issue as between any of the parties, including the plaintiff, that the cross-claimants were who they said they were. I accept, however, that it is possible the matter was pursued as touching the solicitor’s credit, although on the cross-claimants’ case, it was they who had forgotten to bring their passports in to the conference on 26 September.

5. [67]

   The only substantive thread of the cross-claim which continued to run through the actual conduct of the cross-claimants’ case was the claim that the solicitor had not explained the loan documents to the cross-claimants adequately or at all. In that regard, I note that a great deal of time was spent at the hearing in relation to what occurred at the meeting of 21 September 2018 when the cross-claimants did not commit themselves to any course of action, apart from signing the indicative letter of offer. That is a matter of some significance in relation to the absence of the broker as a witness at the hearing, because the absence of the broker’s evidence at the hearing was said to be particularly relevant to the meeting of 21 September. He was not present at the conference on 26 September when the documents were explained by the solicitor to the cross-claimants.

Witnesses

1. [68]

   All of the witnesses were challenged as to their recollection of events. Putting to one side for the moment the evidence of Bilal, the impression that I had of Mr and Mrs Mahmassani and the solicitor was that each of them was endeavouring to give truthful evidence. The issue with these witnesses was whether the evidence they were giving was credible or reliable.

2. [69]

   In Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd’s Rep 403, Lord Pearce discussed credibility. He first discussed two matters concerned with truthfulness, and then went to say (at 431):

3. [70]

   In Watson v Foxman (1995) 49 NSWLR 315 and 319, McLelland CJ in Eq made the following remarks:

4. [71]

   In Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) Leggatt J said:

5. [72]

   Finally, in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Gleeson CJ, Gummow and Kirby JJ said:

6. [73]

   In the present case, there was the further problem that English was not the first language of either of the cross-claimants. In the case of Mrs Mahmassani, although most of her evidence was given through an interpreter, she was clearly able to speak and understand some English. Mr Mahmassani generally gave evidence in English, although at times the assistance of an interpreter was needed. Additionally, Mr Mahmassani said in his affidavit that he forgets names and information, and sometimes he keeps a notepad to record important dates or events. He did not rely on any notes to support any evidence he gave.

7. [74]

   One of the significant problems that led to the differences in recollection between the cross-claimants on the other hand, and the solicitor on the other, was that it seems likely that each side was led to believe a different state of affairs by the broker and probably Bilal. In that way, the cross-claimants first saw the solicitor in circumstances where they thought only that they were obtaining a loan, albeit with their house as security. On the other hand, the solicitor had clearly been led to believe by the broker that he was to advise the cross-claimants regarding the sale of their property to Bilal.

8. [75]

   There was the added matter that, probably in conjunction with Bilal, the investors assisted the cross-claimants to believe that they were simply providing their house as security for a short-term loan which would be repaid by them, with the result that not only would the cross-claimants not have to pay any interest on the loan, but that their property would not be at risk.

9. [76]

   There is little doubt that Bilal deceived his parents. He told them that the investors were his friends who were trying to help him deal with the problems he had in relation to large debts owed to other people. If his parents trusted the investors, and it seems that they did, that was because of Bilal’s deceit. He further deceived them by registering the company, Menara Traders Pty Ltd and appointing them as shareholders and directors without their knowledge. He deceived them again by not telling them that he was told by the broker that he needed to sign the contract of sale because of the lender’s requirements.

10. [77]

    Quite apart from these matters, I did not find Bilal a very satisfactory witness. He gave some evidence which was not in his affidavits, not the least of which was that the purpose of giving the borrowed moneys to the investors was not to pay them back, but so they could invest it along with other money, so that within three months, or possibly six, not only would the loan be repaid to Secured Lending, but a number of his other investors would be repaid in whole or in part. Not only was this completely new evidence, it was also inconsistent with his affidavit evidence, and that of his parents, that the purpose of the loan was repaying the two investors. The whole basis for his distress and the need to approach his parents was that he had signed a piece of paper saying that he would repay them in four weeks, and for every week he was late they would chop off one of his fingers.

11. [78]

    His dishonesty towards his parents, and the unsatisfactory aspects of his evidence, cause me to scrutinise his evidence with care. Not all of it was unreliable. In some respects he corroborated aspects of the solicitor’s evidence as I shall discuss.

Sifting the evidence

1. [79]

   The solicitor said that on or about 17 September 2018 the broker asked him if he could prepare a draft contract for the sale of a Rydalmere property. The solicitor said he was happy to do so but he needed to meet the clients first. The broker continued to press him about the matter.

2. [80]

   On 20 September at 6:35pm an employee of the broker, Mohamed Sowaid, sent an email to the solicitor saying:

3. [81]

   The prior email in the chain was one from Andrew Margi of the broker’s firm, First Finance Choice. It had been sent at 6:21pm on 20 September to Mr Sowaid and Gerrard Toltz of Toltz Lawyers.

4. [82]

   That email said:

5. [83]

   Ms Tibbey of counsel for the cross-claimants pressed the solicitor on the basis of that attached email to show that the solicitor must have known that the arrangement involved a loan to them. The solicitor maintained that he did not know that the cross-claimants were borrowing money until the conference on 21 September when the indicative letter of offer was produced. The solicitor said that the information in the attached email only indicated that the purchaser of the property was obtaining a loan, hence the concern about the extent of the LVR and the value of the property.

6. [84]

   The solicitor gave evidence that on 21 September, prior to him being told about the meeting with the cross-claimants that afternoon, the broker pressed him again about the contract of sale, saying that the clients needed to sell their property urgently to their son. It was at that time that the broker asked the solicitor if he was able to see the cross-claimants that afternoon when they were going in to see the broker.

7. [85]

   It is also apparent that for the broker to obtain the loan, it was necessary to prove to the lender that there was to be a contract by the cross-claimants selling their property. So much is clear from an email sent by Mr Sowaid to Mr Margi at Secured Lending of 20 September at 12:04pm, where he sought finance on a short-term basis for the company Menara Traders Pty Ltd, and with the “exit” being “sale of property to son (contract of sale to follow)”. It is also clear from Bilal’s evidence that the broker had told him on 15 September that the signed contract of sale was not “legally binding” (as he put it); rather, it was just to make the loan go through. As the evidence unfolded at the conference on 21 September, that evidence of Bilal’s is likely to be true.

8. [86]

   I accept the evidence of the solicitor concerning what transpired at the meeting of 21 September 2018. I accept that he was not aware of the loan to the cross-claimants until the broker announced at the meeting that the cross-claimants would be taking out a loan against their property, and it was in those circumstances that Bilal was purchasing the property from his parents.

9. [87]

   There was nothing to suggest that the solicitor knew that the lender simply needed to see a signed contract of sale to facilitate the loan, or that it was a ruse to get the loan; in other words, that the lender was being deceived by Bilal and the broker and, unwittingly, by the cross-claimants. Indeed, his evidence of what he advised on 26 September shows that he was unaware of that arrangement between Bilal and the broker.

10. [88]

    I accept that the solicitor continued to believe that the arrangement was as the broker explained to him on 21 September, that this short term loan was needed urgently, so that the property could be transferred to Bilal within a matter of months to enable him to obtain finance on less onerous terms.

11. [89]

    I do not accept the evidence of the cross-claimants that the solicitor said that he was acting “for both of you” meaning the cross-claimants, Bilal and the investors. It is inconsistent with the solicitor’s other evidence, which I accept, of what he said at the meeting on 21 September, and of his actions at the conference on 26 September of excluding the investor who was present from the meeting.

12. [90]

    Mrs Mahmassani’s evidence was entirely unsatisfactory about this meeting. In her affidavit she said that the solicitor introduced himself to her and said that he was acting for all of them. In her oral evidence she first denied that the solicitor was present at all on 21 September. She said she only saw the solicitor at the second meeting on 26 September.

13. [91]

    Towards the end of her cross-examination, Mrs Mahmassani accepted that the solicitor was present on 21 September. She then went on to give inconsistent evidence about what took place. She said:

14. [92]

    Her evidence that the solicitor did not speak Arabic was contradicted by Mr Mahmassani and Bilal, who agreed that some Arabic was spoken. Moreover, since the solicitor can speak Arabic and knew that Mr and Mrs Mahmassani spoke Arabic, and that their English was less than perfect, there is a high likelihood that the solicitor did speak to them in Arabic from time to time when explaining the documents.

15. [93]

    Her evidence that the reason she did not ask the solicitor to explain matters in Arabic because he could not speak it should, therefore be rejected. This reason is of recent invention, even if it is accepted that she has genuinely forgotten that the solicitor spoke Arabic. The true reason is likely to be that she simply followed her husband’s lead, and signed whatever he signed.

16. [94]

    Despite saying that she could not understand what the solicitor was saying, it may be observed that she detailed a number of things he did say.

17. [95]

    Mrs Mahmassani understood by the end of the meeting on 21 September that part of the loan arrangement was for Bilal to buy their house. Although she blamed the investors for forcing Bilal to do that, the evidence tends to support the solicitor’s evidence that he had been asked to see the cross-claimants in relation to a sale of the property to Bilal, and that he found out during the meeting that it was part of the loan arrangement. He had not read the letter of offer; he merely said that his name could be placed on it as their solicitor.

18. [96]

    In my opinion, Mrs Mahmassani has either confused what happened at the conference on 26 September with what happened on 21 September, or she has confused who said the things that she gave evidence about. It is likely it was the former, because she gave this evidence:

19. [97]

    I do not accept that the solicitor said anything about the loan arrangements on 21 September.

20. [98]

    Mr Mahmassani said in both his affidavit and in his oral evidence that the solicitor was present at the meeting, but claimed in his oral evidence that the solicitor said “I represent the company” which Mr Mahmassani variously said was Secured Lending and Concordia. The solicitor may have said that Concordia was the name of his legal firm; he certainly did not say that he represented Secured Lending.

21. [99]

    The solicitor gave evidence that Mr Mahmassani referred to the investors as his son’s business partners. Although the cross-claimants and Bilal denied that in their affidavits, Bilal volunteered in his evidence that this was said. The evidence was as follows:

22. [100]

    It may be observed that Bilal, in response to an entirely non-leading question, answered that they were said to be “essentially business partners with me”, and that it was most likely his father who said it. That evidence is not only corroborative of the solicitor’s evidence, but highlights the depth of the deception of his parents by Bilal about those men.

23. [101]

    I accept, however, that the solicitor is mistaken in remembering that Mr Mahmassani referred to the investors as his sons. It makes no sense that he would have done so. He was not trying to achieve anything at the meeting; he was reluctantly there, and had no reason to gild the lily about them.

24. [102]

    Mr Mahmassani denied that there was any discussion about a contract of sale or that he was shown a contract of sale at the meeting. When he was shown a copy of the front page of the contract with Bilal’s signature on it during cross-examination, he claimed that that was the first time he had seen that document.

25. [103]

    I do not accept that evidence. It is inconsistent, not only with all of the email evidence that pre-dates the meeting of 21 September as well as the solicitor’s evidence, but it is also inconsistent with what Mrs Mahmassani said twice in her first affidavit, that the investors put the Contract of Sale in front of Bilal and pushed it towards him, and Bilal’s evidence that he signed the contract at that meeting. Mrs Mahmassani also said in her oral evidence that she heard Mr Zreika say to the broker at the meeting that Bilal would buy the house. She assumed, therefore, that the document she saw pushed towards him was a contract of sale. After they left the conference, she asked Bilal why he was buying the house when he had no money.

26. [104]

    Although Mr Mahmassani said that he was not thinking of selling the house, that evidence did not sit easily with admissions that he made that he had been asking an estate agent how much the house was worth, nor with the evidence from the solicitor that Mr Mahmassani told him on 26 September that he had spoken to an estate agent who had talked about what a smaller property near his had recently sold for.

27. [105]

    I accept the evidence of the solicitor that he indicated that he was prepared to act for the cross-claimants in relation to the loan, but that he did not know by the end of the meeting of 21 September whether the cross-claimants intended to retain him.

28. [106]

    Mrs Mahmassani said that they went back on 26 September. The solicitor, the broker and the investors were present. They talked, and her husband listened. She did not understand when they talked. They were asked if they brought their passports and Mr Mahmassani said no. She then said:

29. [107]

    It was the wrong that the solicitor and broker spoke to each other in Turkish because the solicitor does not speak Turkish. The broker did not speak Arabic. They must have communicated in English.

30. [108]

    In cross-examination, Mrs Mahmassani agreed that the solicitor read some of the documents but not all of them to them. She then gave this evidence:

31. [109]

    Although somewhat confused, and internally inconsistent in parts, the evidence tends to support some significant parts of the solicitor’s account, and it is to be contrasted with her affidavit evidence of the conference at [106] above.

32. [110]

    Mr Mahmassani gave this evidence:

33. [111]

    In relation to the mortgage document he gave this evidence:

34. [112]

    He said that anything to do with selling the house wasn’t in his mind because he did not expect it to happen. It was put to him that the solicitor read each of the documents that the cross-claimants signed and Mr Mahmassani said “Maybe he read it, but I didn’t take much notice of it”.

35. [113]

    Mr Mahmassani was asked about signing the minutes of the meeting of Menara Traders. He said,

36. [114]

    He said that he never said to the solicitor that he was going too quickly. He was asked was there some reason he did not read all of the documents and he said:

37. [115]

    In relation to the conference on 26 September, the solicitor made a file note immediately after the conclusion of the conference. The file note in its entirety read:

38. [116]

    While the file note certainly does not corroborate the detail of what the solicitor says was discussed in the meeting, it provides good support for a number of matters, including the significant one about the requirement to sell the house, and to do so within two months. Further, both Mr and Mrs Mahmassani agreed in cross-examination that a number of parts of the conversation set out by the solicitor in his affidavit were in fact discussed with them.

39. [117]

    They agreed that the solicitor said that the loan was for three months, although they said that he told them they could get an extension of it to six months. I do not accept that the solicitor said that to them. He was not the solicitor for the lender. There was nothing in the documents which suggested that the loan could be extended, except a reference to a rollover fee in a document headed Schedule B. At best, the solicitor could have said that they might be able to ask for an extension of three months, but on the state of the evidence I am not prepared to find that he did so. It is not consistent with his refusal to negotiate with the lender on the interest rates; as he said, his role was to advise them on the documents he had. It is far more likely that it was the broker or the investors who told the cross-claimants that the loan could be extended to six months at an earlier time.

40. [118]

    The cross-claimants agreed that the solicitor said that the interest was pre-paid and would come out of the loan, although Mrs Mahmassani wrongly thought or remembered that the amount was $100,000. Mr Mahmassani remembered that the solicitor told him about the interest rate, which Mr Mahmassani thought was very high. He remembered that the solicitor mentioned that a number of fees had to come out of the money they were borrowing. He remembered the Cheque Directions document which he signed, saying that he remembered seeing, “Menara Traders, Commonwealth Bank”. In his first affidavit, Mr Mahmassani said he knew that the bank account he opened at the CBA Parramatta with the investors was in the name of Menara Traders Pty Ltd. I find that the cross-claimants knew that the money from the loan was to be paid to Menara Traders Pty Limited.

41. [119]

    Mrs Mahmassani agreed that the solicitor said that if they did not repay the money, the lender could take their house, but Mr Mahmassani did not remember that this was said. Mr Mahmassani agreed that the solicitor told them that they were guaranteeing the loan. They both agreed that the solicitor explained some of the documents.

42. [120]

    They both denied that the solicitor said words to the effect:

43. [121]

    Both of them agreed that there was discussion at the conference about how much their house was worth, although Mr Mahmassani denied at first that the house was mentioned at all. Both agreed that Mr Mahmassani said, “I’m sure I can get at least $1.2m for the house”, and that Mr Mahmassani had spoken to an estate agent about its value. It is difficult to understand why the value of the house was being discussed if there was no intention to sell it.

44. [122]

    The file note and the specific matters which the cross-claimants agreed had been discussed by the solicitor undercut the evidence given by the cross-claimants in their affidavits of what occurred at the meeting. Mr Mahmassani said:

45. [123]

    I am entirely satisfied that the solicitor explained the special conditions of the mortgage, that they were to enter into a contract for the sale of their house within two months of signing the documents. I am satisfied that the cross-claimants knew, both from their past experience with mortgages, and from what they were told by the solicitor, that if this loan was not repaid, they could lose their house. Both the solicitor and Mrs Mahmassani said that Mr Mahmassani had his reading glasses with him. In any event, Mr Mahmassani agreed that he read some of the documents, evidence corroborated by his wife.

46. [124]

    A significant matter which points to the unreliability of the cross-claimants’ memories, and the likelihood that they had discussed what took place and reached some sort of agreement about what occurred, consciously or unconsciously, comes from the assertion by both of the cross-claimants that they needed to return to the solicitor’s office on 27 September for the purpose of taking Mr Mahmassani’s passport. Each of the identification photographs provided by the solicitor to the lender’s solicitors contains a handwritten note signed by the solicitor and dated 26 September 2018. The solicitor gave evidence that he took the photographs on that day, and he produced his old phone that had been used to show the dating that automatically appears on the phone when the photographs were taken. Although it was submitted that I should not accept that evidence, there was nothing to suggest that the solicitor was not telling the truth, and the phone evidence was compelling.

47. [125]

    There was a suggestion in the evidence that the cross-claimants had attended the solicitor’s office on 27 September to deliver the original CT. Their evidence concerning whether or not they took the CT on 21 September 2018 or at some other time, or whether it had been given to Bilal to provide to the broker at an earlier time, was entirely unsatisfactory.

48. [126]

    The cross-claimants and Bilal all say that either Bilal said, or one of the investors said, on 21 September to Mr Mahmassani that he should take the CT with them to the conference. However, on 19 September, Bilal sent an email to the broker saying:

49. [127]

    He was asked about that email, and he gave the following evidence:

50. [128]

    Despite Bilal’s denials of having provided the CT or a copy of it to the broker before 21 September, on 20 September at 12.04pm Mr Sowaid sent an email to Andrew Margi making an application for finance for Menara Traders. The subject was “Certificate of registration”. There were three attachments to the email; one was the rates notice, one was “Certificate” (clearly, the certificate of registration of Menara Traders), and one was the certificate of title. Although it is conceivable that Mr Sowaid had only a copy of the CT, he could by 20 September only have obtained it from Bilal. That puts the lie to Bilad’s evidence that his father would never release the CT to him.

51. [129]

    Other evidence, however, points to the original CT only being provided to the solicitor on 27 September, as he maintained. On 27 September at 12.19pm he emailed Kenneth Lau at Summer Lawyers saying that the original CT and Loan Documents were available for collection at his office. The evidence from both of the cross-claimants was that they took the CT on 21 September and it was given to the broker at the conference. The broker already had a copy of it, and had no need of the original CT, particularly when the solicitor was to act for the cross-claimants.

52. [130]

    I reject the evidence of the cross-claimants and Bilal that anything was said about bringing the CT on 21 September, or that it was given to the broker at the conference on that day. Whilst anyone can make a mistake about dates and times, the fact that three persons made the same mistake raises a suspicion that this aspect of the evidence has been co-ordinated. In Mrs Mahmassani’s oral evidence, when she was asked if Bilal said anything on 21 September about bringing the CT, she said (contrary to her affidavit evidence),

53. [131]

    All of this evidence, and some of the other matters I have identified, points also to a conflation of various events in the evidence of the cross-claimants and Bilal.

54. [132]

    There are two other aspects of the solicitor’s evidence which I do not accept. The first concerns the length of the meeting of 26 September 2018. The solicitor asserted that the meeting went for three hours. The evidence of the cross-claimants was that it was much shorter, perhaps, about one hour.

55. [133]

    Mrs Mahmassani said the meeting was only 20 minutes of half an hour. Similarly, Mr Mahmassani said the solicitor maybe spent half an hour, maybe less or more. He also said it maybe took an hour or between half and one hour.

56. [134]

    Even allowing for the fact that there needed to be a translation of some of the explanation into Arabic, I think it is quite unlikely that the conference would have lasted three hours when regard is had to the documents that needed to be explained and signed. Having regard to all of the evidence, I consider it likely that the conference took about an hour or an hour and a half. It was certainly not 20 minutes or half an hour.

57. [135]

    However, the length of the conference is not of itself significant. I am satisfied from the solicitor’s evidence and from the file note that he made that the important aspects of the transaction were explained to the cross-claimants, and that they knew they were entering into a mortgage to guarantee the loan that was being made which was to be provided to their son and the investors.

58. [136]

    The other matter concerns the solicitor’s evidence in relation to Mr Mahmassani seeing an accountant and receiving advice from him. The name of the accountant and his details that appear on the indicative letter of offer was Bilal’s accountant, as he admitted. The likelihood is that he provided that information to the broker, and that was how it came to be written on the letter of offer. The suggestion by Bilal that this person was his parents’ accountant was another aspect of his deceit in relation to this transaction as far as both his parents and the lender were concerned.

59. [137]

    It does not seem at all likely that a person in the position of the cross-claimants would have an accountant, and I accept Mr Mahmassani’s evidence that he did not.

60. [138]

    Mr Mahmassani, when asked when he first met the investors, said, “Yes, I think I met them first time with the accountant”, but he then went on to say, “No, I saw them once with my son, in his house.” I do not consider that Mr Mahmassani intended to say “accountant”, and there is no other evidence, including from Bilal, that Mr Mahmassani ever met the investors (before 21 September) except in the presence of Bilal.

61. [139]

    With the exception of those matters, I accept the solicitor’s account of the meeting of 26 September.

Negligence and breach of retainer

1. [140]

   In Artahs Pty Ltd v Gall Standfield & Smith (A Firm) [2012] QCA 272 the Queensland Court of Appeal said this concerning the obligation of a solicitor in relation to the explanation of documents:

2. [141]

   On the other hand, it is not part of the solicitor’s job to advise whether or not they should enter into the transaction: Studer v Boettcher [2000] NSWCA 263 at [75]. In Banco Exterior Internacional v Mann (1955) 1 All ER 936 Sir Thomas Bingham MR said (at 950):

3. [142]

   Based on the assessment of the evidence, which I have earlier discussed, I am satisfied that the solicitor explained that the loan was a short-term loan for three months, and that if it was not repaid within that time the house would need to be sold to pay the lender. The solicitor told them that it was a special condition of the loan that they had to enter into a contract for the sale of the house within two months of entering into the loan. The solicitor told them that they should not sign the loan documents until they had exchanged contracts to sell the property to their son so that he could obtain a loan against the property to pay out the lender from whom they were borrowing.

4. [143]

   Ms Tibbey submitted that the arrangement here was pure asset lending, and that the solicitor did not ask them any questions about their ability to repay the loan. However, the solicitor knew that the cross-claimants had no income to repay the loan and that that was the basis for the exit strategy. He made a note to the effect that they had no income.

5. [144]

   Pure asset lending may result in a contract being found to be unjust: Provident Capital Ltd v Papa [2013] NSWCA 36 at [107]-[113]. That is a matter between the lender and the persons liable for repayment of the loan. The designation of the loan as pure asset lending does not in itself create a liability in the solicitor advising on the loan. It may mean that the solicitor must take extra care to ensure that the clients understand the arrangement and the risks.

6. [145]

   It may be doubted that this was pure asset lending. The lender, seemingly, knew that the mortgagors had no means of paying instalments. No instalments were required during the term of the loan, and interest was pre-paid for the whole term. In addition, the lender required proof of a contract to sell the property, probably to the son, but perhaps to some other person as the method of repayment. If the broker and/or Bilal were deceiving the lender about that contract of sale, there is no evidence that the lender knew that.

7. [146]

   The evidence is that the solicitor explained to the cross-claimants the exit strategy that the lender stipulated. He did not know that the investors had told the cross-claimants that they (the investors) would repay the loan, nor that the cross-claimants believed that they would. He knew that Mr Mahmassani had talked to the real estate agent, and that he was confident he would get more than $1.2m for his house if sold on the open market. He explained to them that if the loan was not repaid the house could be sold, and he advised them to enter into a contract for sale before they took out the loan. The solicitor enquired of them before they signed the documents if they had understood what he had said and they agreed that they had. Even if pure asset lending was involved, I am satisfied that the solicitor took the appropriate care in his explanation and advice to the clients.

8. [147]

   None of the particulars in paragraph 24 of the cross-claim has been made out.

9. [148]

   Although not pleaded, Ms Tibbey said in oral submissions that there were other options available to the cross-claimants, and if the solicitor had driven home that this was a completely improvident transaction from their point of view, those options could have been explored. What had to be driven home, Ms Tibbey said, was that their house was at stake and could be sold. Her submissions did not expressly say that the solicitor ought to have outlined the other options, but that seemed to be implied.

10. [149]

    I do not consider that the solicitor had an obligation to suggest other options. In any event, the evidence did not support the options that Ms Tibbey suggested, such as approaching other lenders or entering a reverse mortgage. Time was of the essence because of the threats that had been made to Bilal about what would happen if the money was not paid to the investors very quickly. The options were, in any event, very limited because the cross-claimants could not service a loan, and repayment was possible only by sale of the house to Bilal or someone else.

11. [150]

    It was also submitted, although not pleaded, that the solicitor ought to have advised that the investors should sign some form of security to ensure that the money that was going to them would be repaid. Indeed, the submission was put as high as to say that he had a duty to secure enforceability from them.

12. [151]

    In the first place, this was a matter that went well beyond any duty that was pleaded in the cross-claim. Secondly, the cross-claimants may have believed that the investors were going to repay the money (and they said that they did believe that), but there is no evidence that they said anything to the solicitor at the conference on 26 September suggesting that they were entering into the arrangement because of any reliance they had on anything that had been said to them by the investors. There was certainly evidence that the investors had said or suggested that to the cross-claimants in prior conversations, but there is no evidence that the solicitor was ever told of those prior conversations or that any such promise had been made by the investors.

13. [152]

    The cross-claimants knew that their house was at risk if the loan was not repaid. They had entered into prior mortgages of their house, including for Bilal. For reasons I have given, I am satisfied that the solicitor explained to them the implications for their house, both the need to sell it within two months, and what would happen to it if the loan was not repaid.

14. [153]

    It would have been far preferable, and the solicitor may have avoided the present claim, if he had confirmed the advice he provided to the cross-claimants in a letter written closely proximate to the conference of 26 September. The solicitor has no obligation to do so, but such a letter would ordinarily quiet any controversy that would otherwise arise from the sort of advice he was asked to give. However, the solicitor did the next best thing, which was to make a file note, reasonably contemporaneously with the conference, summarising the main matters discussed.

15. [154]

    Ms Tibbey pointed to the solicitor’s obligations under r 11 of the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015 (NSW) regarding documents which must be completed and retained when a solicitor gives advice to a borrower/guarantor/mortgagor. It does not appear that the form of the document completed by the solicitor conformed with the requirements of the rule. Rather, the solicitor completed documents provided by the lender which, whilst similar, were not in the approved form.

16. [155]

    Such a failure on the part of the solicitor is not evidence of negligence; nor did the cross-claim allege that it was.

17. [156]

    The conclusion I have reached in relation to the issue of breach derives partly from what appears in that file note, partly from a general acceptance of the solicitor’s evidence, partly from my doubts about the reliability of the evidence of the cross-claimants, and partly because I do not believe that the solicitor was told everything that the cross-claimants and/or Bilal and/or the broker knew about the events giving rise to the solicitor’s retainer.

18. [157]

    The solicitor did not breach his duty of care.

Unconscionable conduct

1. [158]

   It is necessary to examine the pleading to understand the claim that is made against the solicitor in this regard. Paragraph 26 of the cross-claim pleads that, at the time of the meetings on 21 and 26 September 2018, the solicitor should reasonably have been aware or should have taken steps to ascertain whether the cross-claimants were in a position of special disadvantage in dealing with the plaintiffs “and their agent, the cross-defendant”. Particulars are then given about the cross-claimants, their education, health and language difficulties.

2. [159]

   The cross-claim then said that the cross-claimants repeated all of the cross-claim up to that point, which principally asserted that the solicitor was acting as the solicitor for the plaintiff and misrepresented the fact that he was acting as the cross-claimants’ solicitor. In that way it was pleaded that the cross-claimants did not receive independent legal advice, that is, independent from the plaintiff and its agents.

3. [160]

   Paragraphs 28 and 29 then plead:

4. [161]

   It is very difficult to discern the basis for suggesting that the solicitor acted unconscionably, except to the extent that it is alleged that he wrongly claimed to be acting for the cross-claimants when he was in fact the solicitor for the plaintiff. The cross-claimants abandoned their claim that the solicitor acted for the plaintiff in the transaction. No amendment was made to the pleadings when that occurred, hence, the difficulty in being able to understand how, on the evidence, the solicitor acted unconscionably.

5. [162]

   It may be accepted that it was part of the solicitor’s duty of care to ensure that persons in a disadvantageous position to another party were protected. Ordinarily, that duty would be satisfied by the solicitor showing that proper advice was given to the clients in relation to the transaction they were proposing to enter. That, however, is an aspect of negligence, and does not give rise to any finding that a solicitor who fails in that way is guilty of unconscionable conduct.

6. [163]

   In Bristol and West Building Society v Mothew [1998] Ch 1, the United Kingdom Court of Appeal deprecated the blurring of lines between a common law duty of care and, in that case, breaches of fiduciary duty. That was a case where a solicitor was being sued on the basis of statements he had made in relation to a transaction in which he was retained. The solicitor accepted that he had breached his duty of care. However, damages at common law were limited, and for that reason the representee wished to establish that the solicitor had also breached a fiduciary duty it was claimed was owed. On that basis, it was said that he would be entitled to equitable damages which would exceed those recoverable at common law.

7. [164]

   The Court of Appeal referred to what had been said by Southin J in Girardet v Crease & Co (1987) 11 BCLR (2d) 361 at 362:

8. [165]

   The Court of Appeal also quoted Ipp J (when a judge of the Supreme Court of Western Australia) in Permanent Building Society v Wheeler (1994) 14 ACSR 109 where his Honour said (at 157-158):

9. [166]

   The position is analogously the same in relation to unconscionable conduct. A solicitor’s breach of his retainer or duty of care in failing properly to explain and advise in relation to a transaction to be entered into by his clients does not mean that he has acted unconscionably, even if his clients, vis-à-vis the other party to the transaction, are in a position of disadvantage that might enable them to assert unconscionability against the other party.

10. [167]

    Apart from the assertion of a position of disadvantage by the cross-claimants in relation to the plaintiff, there is no other evidence or basis for finding that the solicitor has acted unconscionably. The claim is misconceived.

Misleading and deceptive conduct

1. [168]

   Paragraph 30 of the amended cross-claim asserts that the conduct of the solicitor on 21 September was misleading and deceptive. The particulars are said to be the whole of the pleading in paragraphs 1 to 23 of the cross-claim and, in addition, five further particulars set out in paragraph 32 as follows:

2. [169]

   There seem to be two aspects to the claim for misleading and deceptive conduct. The first is the now abandoned claim that the solicitor was acting for the plaintiff and misleadingly represented that he was acting for the cross-claimants.

3. [170]

   The second aspect appears to be a re-expression of the claim in negligence and for breach of retainer by characterising his explanation of the documents as misleading and deceptive because it was not adequate.

4. [171]

   There is a further problem with the pleading because the documents in relation to the loan agreement were explained at the meeting on 26 September and not 21 September, being the date identified in paragraph 30. However, reading the pleading very broadly, I will infer that the claim for misleading and deceptive conduct includes the meeting of 26 September.

5. [172]

   In oral submissions, Ms Tibbey asserted that the misleading conduct was that the solicitor allowed the statements of the investors to stand when they said on 21 September that the money would be borrowed for three months, invested and returned, and the cross-claimants would not lose their house. That was not pleaded in the cross-claim. I have accepted the solicitor’s account of that meeting, and he does not record that those statements were made.

6. [173]

   Ultimately, Ms Tibbey accepted that a finding of misleading and deceptive conduct was not going to produce a different result from a finding of negligence. I would put the matter more succinctly by saying that if the solicitor was not negligent he was not guilty of misleading and deceptive conduct.

Causation

1. [174]

   Although not strictly necessary to do so because I have found no breach on the solicitor’s part, I should say something about causation.

2. [175]

   Causation is to be determined in accordance with s 5D of the Civil Liability Act 2002 (NSW). The first element of the determination is that the negligence was a necessary condition of the occurrence of the harm. In the present case, the evidence satisfies me that any failure on the solicitor’s part (assuming that to be proved) was not a necessary condition of the occurrence of the harm because the cross-claimants would have gone ahead with the arrangement in any event. The following matters are significant.

3. [176]

   First, when the investors came to see Mr Mahmassani after Bilal had told him of the problem, Bilal introduced them as “my friends, they want to help me”, and the investors said, “We are his friends, we are trying to help him”. Mr Mahmassani asked, “What can we do?” and the investors said that if he mortgaged his house he could give their money back to them. Mr Mahmassani replied, “No, I don’t want to pay interest. It is not my problem but I have to save my son.” Mr Mahmassani also said that he believed the investors when they told him they would pay the interest and give the money back.

4. [177]

   When the investors came to see Mrs Mahmassani and asked her to take out a loan, she said to them:

5. [178]

   Secondly, the cross-claimants had, in 2005 and again in 2008, taken out mortgages with NAB and MDN Mortgages Pty Ltd to assist Bilal buy a house. The NAB mortgage was refinanced with MDN, and the cross-claimants were given money by relatives to repay the MDN mortgage.

6. [179]

   Thirdly, at the meeting on 26 September, after the solicitor had explained the documents he asked the cross-claimants, “So, would you like to proceed?” Mrs Mahmassani said, “Do you have any children?” The solicitor said, “No”. Mrs Mahmassani said, “You wouldn’t understand what you will do to help your child.” The solicitor then said that the decision was ultimately one for them to make, and Mr Mahmassani said they wanted to proceed.

7. [180]

   In her oral evidence, Mrs Mahmassani said, when asked about this conversation:

8. [181]

   Mrs Mahmassani also said that she was afraid they would kill her son, and that was why she felt that she should do what was being asked. She said, however, that she believed they would pay the money back. She did not tell the solicitor of her fears in that regard, saying only what is set out at [180] above.

9. [182]

   Mr Mahmassani also agreed in his oral evidence that he wanted to help his son and agreed that he couldn’t go to the mosque because he felt shame for what was happening.

10. [183]

    Fourthly, on 25 September, the cross-claimants went with the investors to open the bank account in the name of Menara Traders into which the borrowed moneys were to be deposited. Each of Mr Mahmassani and Mr El Chami were the signatories on the account. That is a strong indication that the cross-claimants had already made up their mind that they would do what Bilal and the investors were asking them to do.

11. [184]

    Fifthly, Mr Mahmassani went with the investors on 28 September 2018 to the CBA at Ermington where the loan monies had been deposited into the Menara Traders account. On that day the investors said they wanted to withdraw the money from that account and put it into Mr El Chami’s investment account to make some money. That differed from what Mr Mahmassani had previously been told, which was that they would use $100,000 per month and invest it. Nevertheless, Mr Mahmassani then signed papers to allow the money to be withdrawn from the Menara Traders account and put into Mr El Chami’s account.

12. [185]

    Sixthly, the cross-claimants agreed that they knew that if they did not repay the money the lender would take their house. However, they trusted the investors to repay the money as they had said they would. That Mr Mahmassani was determined to go ahead regardless of what the solicitor said, was somewhat corroborated by an answer he gave concerning reading the guarantor’s advice document:

13. [186]

    When dealing with the issue of breach, I recorded the submissions made on behalf of the cross-claimants about what it was said the solicitor should have said or done. I have found that the solicitor provided the advice he was obliged to provide. No submissions were made about what other advice should have been given that would have resulted in the transaction not proceeding.

14. [187]

    For all of these reasons, even if there was a breach of duty, causation is not established.

Proportionate liability

1. [188]

   In the light of my conclusions on breach and causation, it is not sensibly possible to apportion liability on the basis that the solicitor was liable to some extent. It is enough to say this.

2. [189]

   This was a sad and unfortunate case. Bilal must accept a great deal of responsibility for what occurred. He persuaded his parents into this arrangement by deceiving them about the investors, and the likelihood that his parents would ever recover the moneys they were prepared to borrow to give to those investors. Whether, if he had told them the whole truth, including the threats to chop off his fingers, they would have gone ahead in any event, is hard to say. They obviously love their son, did not want him to come to harm, and wanted to help him, as they done in the past by twice mortgaging their house for him.

3. [190]

   On their own evidence, but because they were deceived, they believed that the investors would do the right thing. So much is clear from the willingness of Mr Mahmassani to let them draw out all of the funds from the Menara Traders account where he had some control. Of course, they were deceived also by the investors who had no intention of repaying any of the money but, again, the cross-claimants were doing it for Bilal.

4. [191]

   If Bilal’s evidence is to be believed, both he and the broker deceived the lender into thinking there was a binding contract of sale for Bilal to purchase the property.

5. [192]

   None of these people told the solicitor all they knew, and which he needed to know to give fully informed advice. Any advice he gave was limited in terms of what he knew. All of these people, including the cross-claimants would have to bear a proportion of the loss.

Conclusion

1. [193]

   Accordingly, I make the following orders: