Bakovski v Lenehan

These proceedings involve a claim for damages by Mr and Mrs George Bakovski against the first defendant, Norman Rutherford Lenehan, solicitor, trading as Lenehan & Co, and the second defendant, James Socrates Arkoudis, solicitor, who was, at the material time, employed by the first defendant.

The plaintiffs allege professional negligence in respect of legal services provided by Mr Arkoudis on 13 August 2004, including the provision of legal advice in relation to a loan and mortgage transaction that they entered into on that date with a company, Accom Finance Pty Ltd ("Accom"). The mortgage was granted by the plaintiffs in favour of Accom in respect of a property located in Rockdale owned by the plaintiffs ("the Accom mortgage").

Mr Lenehan is sued upon the basis that as employer of Mr Arkoudis he is vicariously liable for the alleged negligence of his employee, the second defendant.

Mr Edmund Finnane of counsel appeared on behalf of the plaintiffs. Mr Greg Curtin SC appeared on behalf of the defendants.

The plaintiffs' case is that they understood that they were providing the property as security for a loan to be made to a Mr Mitrevski, when in fact the documents make it clear that the loan was to them as borrowers. There is no mention in the documents of Mr Mitrevski, or to the fact that the loan funds were to be applied for his benefit.

On or about 16 August 2004 the Accom mortgage was settled. The loan was in the amount of $386,250 and the loan monies were paid to a company, Demar Investments Pty Ltd ("Demar Investments"), of which Mr Mitrevski was director and manager.

The pre-transaction dealings between the plaintiffs and Mr Mitrevski are significant in the history that led to the Accom loan. The issue as to whether Mr Mitrevski's conduct towards Mr and Mrs Bakovski was misleading or deceptive within s 42 of the Fair Trading Act 1987 will be discussed later in this judgment. However, no claim is made against him in these proceedings.

The plaintiffs held no legal or beneficial interest in Demar Investments.

On or about 20 August 2004 the Accom mortgage was registered on the title to a property owned by the plaintiffs, referred to in the judgment as "the Rockdale Property".

The Amended Statement of Claim filed in these proceedings on 22 December 2010 also included a claim against Stephen Grant Sharpe, solicitor, trading as LJ Sharpe and Co. Those proceedings, however, were subsequently dismissed by consent on 18 October 2012.

The plaintiffs allege that Mr Arkoudis failed to advise them as to the risk and consequences of the relevant transactional documents for the Accom loan signed by them in his presence.

The procedure to be followed by a solicitor in giving advice in relation to a loan transaction is, in part, governed by the Revised Professional Conduct and Practice Rules 1995, in particular, Rule 45. That rule requires a solicitor to take certain steps when asked to give independent advice to a proposed signatory on loan or security documents. Rule 45.6.1 specifies that a solicitor in such circumstances should give advice as called for in the circumstances of the particular case.

The plaintiffs contend that in consequence of the alleged breach of the retainer which they entered into with the first and second defendants, the Rockdale property was mortgaged in favour of Accom without any benefit to them, the loan monies being paid to Demar Investments. Indeed as later events were to show, they suffered substantial loss as a consequence of the harsh and oppressive contractual conditions that were binding on them.

Some months after the transaction Accom commenced proceedings in this Court against the plaintiffs for possession of the Rockdale property. It obtained judgment for possession on 26 October 2004.

The plaintiffs' case is that they were unable to repay the principal sum and the exorbitant interest owing under the Accom mortgage and they were required to enter into refinancing arrangements with Liberty Financial which produced further loss to them.

On 13 December 2004 they paid the amount of $526,133.94, including interest in advance and fees, in order to obtain a discharge of the Accom mortgage.

The plaintiffs, accordingly, claim damages in respect of the following: (i) Expenses and interest on the Accom loan; (ii) A proportion of the interest, including compound interest, incurred in further refinancing of the original loan; (iii) Expenses incurred in having brought proceedings with a view to recovering their losses against Mr Mitrevski.

The parties completed a Joint Statement of Issues in Dispute which was in the following terms: "1. Whether, on 13 August 2004, the plaintiffs understood that the documents executed by them on 13 August 2004 were in the nature of a loan of monies to them as borrowers rather than a loan in relation to which they were guarantors. 2. Whether the defendants' retainer, and/or their duty of care, imposed on them, in the circumstances (including the circumstances that are the subject of the central dispute of fact), duties: a. to consider whether or not the underlying transaction for which the Accom loan was to be used, was in the interests of the plaintiffs, and if not, to so advise them; and b. to insist, as a precondition to providing services to the first plaintiff, that a Macedonian interpreter be present. 3. The central issue of fact relates to the conference between the plaintiffs and the second defendant on 13 August 2004 at which the "Accom loan documents" were executed. The issue is which version of events, that of the plaintiffs or that of Mr Arkoudis, should be preferred. 4. Following determination of issue 4, the next issue is whether the defendants breached their duty of care and/or their retainer. If so, the following questions then arise. 5. The amount of loss and damage suffered by the plaintiffs. 6. Whether the plaintiffs are entitled to compound interest as part of their damages. 7. Whether the plaintiffs were guilty of contributory negligence. 8. Whether Robert Mitrevski's representations to the plaintiffs (as pleaded) were misleading or deceptive. 9. Whether, Robert Mitrevski was guilty of misleading or deceptive conduct as alleged in paragraphs 26 to 37 of the Amended Defence. 10. In the event that Robert Mitrevski was guilty of misleading or deceptive conduct, whether this caused loss to the plaintiffs. 11. In that event, whether the loss or damage caused by the defendants is the same loss or damage as that caused by Robert Mitrevski, so as to constitute the defendants and Robert Mitrevski concurrent wrongdoers. 12. In that event, what is the proper apportionment of responsibility between the defendants and Robert Mitrevski." (Plaintiffs' Tender Bundle, vol 1 at pp 50-51)

Mr Bakovski swore two affidavits, the first on 22 November 2011 and the second on 27 April 2012. In the course of cross-examination he conveyed the impression of being an unsophisticated but sincere witness.

Mr Bakovski was born on 19 April 1942. He married the second plaintiff, Vera Bakovski, on 3 June 1968.

Mr Bakovski was born in Macedonia and arrived in Australia on or about 14 November 1964. He lived firstly in Melbourne until approximately January 1996. He then moved to Wollongong.

He completed Secondary Vocational High School - Technical Skills in Macedonia. Following migration to this country, he continued his Technical and Electrical Education through an apprenticeship program whilst working in the steelworks in Port Kembla. In Melbourne he worked as a spot welder in the Melbourne Ford Factory until January 1966.

Mr and Mrs Bakovski have two adult children.

Mr Bakovski's evidence was that he is not proficient in English and that he cannot read English very well. He said that if he does read anything in English it takes him some time to read each word. He said that he often cannot pronounce words that he is able to read or understand.

He said that generally he relied on his wife to read any mail or other documents written in English. She then explains it to him in the Macedonian language.

He said that if required to sign a document written in English, he is not able to read and understand the contents of the document.

After migrating to Australia Mr Bakovski's employment history was as follows: (i) From 1966 to 1968 he was employed as an apprentice electrician at BHP Steelworks, Port Kembla. (ii) From 1969 to 1970 he worked as an electrician at the Central and Darling Harbour Railway Depots. (iii) For a period after 1970 he was employed in the glass factory in South Dowling Street, Moore Park. (iv) From about 1971 to 1981 he worked as an electrician for Chloride Battery.

On 21 May 1977, while working at Chloride Batteries, Mr Bakovski suffered an electrical shock. That, he said, has affected his ability to remember things and has resulted in some memory loss. He has not worked since his employment was terminated on 16 February 1981.

The plaintiffs over the years purchased two residential properties and acquired a third by way of an inheritance. They also owned adjoining residential properties in Belmont ("the Belmont properties").

According to Mr Bakovski, prior to 2004 he and his wife had been interested in selling the Belmont properties over a period about 10 years. He said the main reason they wished to sell them was because they were experiencing "...a lot of issues with people stripping the old houses in the Belmont area": Mr Bakovski's first affidavit at [20]. He said that the properties had been vandalised and damaged. They had been managed by a real estate agent in Belmont for a period of time.

The properties were on two separate titles and had two old style cottages situated on them. They had acquired them as separate lots but subsequently consolidated them into one lot.

They placed the properties at some stage in the hands of a local agent for sale and subsequently another agent in Newcastle was retained to market them for sale.

Mr Bakovski said the Belmont properties were waterfront properties that looked out onto Lake Macquarie.

Mr Bakovski knew a Mr George Mitrevski, also known as Robert Mitrevski. Mr Bakovski came to know him in 2003 through Mr Mitrevski's sister, Mrs Jovanovski.

The plaintiffs said that in about 2001 Mr Mitrevski and his brother-in-law, Mr Dragi Jovanovski, were carrying out construction work on a property in Smithfield. He said he had become aware of that fact through discussions with friends of the family and members of the Macedonian community in Sydney.

In about September 2003 Mr Bakovski and his wife attended the home of Mrs Jovanovski for a birthday party. On that occasion, after having eaten dinner, Mr Bakovski went out to the front of the house with some other men who wanted to have a cigarette. At some point Mr Mitrevski joined the group. Mr Mitrevski's sister was a friend of the Bakovskis and they had known her for some years. A discussion between the men turned to matters of work and Mr Bakovski's family situation. He said that in the course of a conversation with Mr Mitrevski, the latter told him that he was a builder and developer and that he was developing 36 home units in Malua Bay. Mr Mitrevski claimed that he had completed 18 of the home units and he had 18 more to construct.

In this conversation Mr Bakovski said that he told Mr Mitrevski that he owned a property in Belmont which was a water frontage property and asked him whether that might be a property he would be interested in purchasing and developing. Mr Mitrevski replied that he would be very interested.

Subsequent arrangements were made for a visit by Mr Mitrevski in company with Mr Bakovski to Belmont. Mr Bakovski showed him the properties and the nearby area. Mr Bakovski said that Mr Mitrevski said: "I really like the property a lot. I will think about it and let you know. It is very good because of the water frontage": Mr Bakovski's first affidavit at [34].

Some weeks later Mr Mitrevski contacted Mr Bakovski at his home and asked if he could see the property again. Mr Bakovski agreed.

They again travelled to Belmont in Mr Bakovski's car. When at the Belmont properties Mr Mitrevski said that he liked them a lot and wanted to buy them. He said he was very serious about buying and did not want Mr Bakovski to go and sell them to anyone else. Mr Bakovski said the following conversation then took place: "Mr Mitrevski and I then travelled back to [Rockdale]. Vera was present, and we had a conversation to the following effect: Mr Mitrevski said: 'I will give you $100,00 up front payment.' I said: 'The price we are selling Belmont is $5 million.' He said: 'I like the place so much I will give you $7 million. Just don't sell the property.' I said: 'Ok.' He said: 'I have finished 18 units and they are sold in Malua Bay. I will give you $100,000 deposit from this. When I sell the rest of the units I will give you another $300,000 as a further deposit. When I sell the properties I will pay you the rest of the $7 million. I like the land, I like the place. Please don't sell it.' Vera said: 'Ok. Go ahead.'" (at [37])

Subsequently Mr Mitrevski, according to Mr Bakovski, paid a total of $100,000 supposedly as a form of deposit for the Belmont properties. The money was paid in three separate instalments into a bank account in the name of Mr and Mrs Bakovski which was held at the National Australia Bank ("NAB"). They were as follows:

Exhibited to Mr Bakovski's first affidavit were documents "GB1-1" to "GB1-5", being copies of account statements for the relevant NAB joint account showing the payments made by Mr Mitrevski: Mr Bakovski's first affidavit at [39].

Mr Bakovski said that at the time he trusted Mr Mitrevski because he thought he was an honourable family man from within the Macedonian community in Sydney. He said that he did not think about making a written or a formal agreement with him for the sale of the properties because, he said, things were a little rushed and he did not fully understand what was going on: Mr Bakovski's first affidavit at [40].

Mr Bakovski said a few weeks later Mr Mitrevski again came to his house. He handed to his wife a document which appeared to be "like a preliminary plan": Mr Bakovski's first affidavit at [42]. He then set out a conversation in which Mr Mitrevski said he had done some research with the Council and he really liked the Belmont properties. He said that the document he had with him was a plan of them which showed how many units he would build on it. Additionally, it is said Mr Mitrevski said: "I want you to help to get some money to finish off my Malua Bay development. Look at what I want to do with Belmont. I have spent money on searches at the Council and some other things. Please don't sell Belmont to anyone else."

Mr Bakovski said that Mr Mitrevski handed him a document and that he said: "Can you help me with some money so I can finish my Malua Bay project?" Mr Bakovski said he responded: "We can help you. We can give you the deeds from one of our properties and you can borrow money to finish off the units in Malua Bay". He said he agreed and that his wife in effect also said she agreed: Mr Bakovski's first affidavit at [42].

The document "GB1-6" was identified as a copy of the document Mr Mitrevski handed to Mr Bakovski.

Mr Bakovski said that Mr Mitrevski did not mention how much money he wanted to borrow. He said his understanding from the conversation he had with him was that Mr Mitrevski would use the title deeds for one of their properties as security to borrow money to finish his Malua Bay development. Mr Bakovski said he understood that if the loan money was not paid back that the lender could then try and take their property. Mr Bakovski said: "...However, I did not believe that this would happen because I thought that Mr Mitrevski was going [sic] pay everything back, because he had other businesses and property. I also believed that he would pay me back because he had already paid a $100,000.00 deposit. I also believed that Mr Mitrevski was going to pay everything back because he had already paid $100,000 as a deposit": Mr Bakovski's first affidavit at [45].

Mr Bakovski said that his wife subsequently gave the Certificate of Title to the property in question to Mr Mitrevski. He said it was around this time that Mr Mitrevski paid the $100,000 deposit for the purchase of the Belmont properties: Mr Bakovski's first affidavit at [46].

Mr Bakovski's evidence was that he was not involved in organising finance for Mr Mitrevski. He said his understanding from discussions he had with Mr Mitrevski was that he, Mr Mitrevski, was going to organise the loan finance and that any loan would be taken out in Mr Mitrevski's name and not in the name of Mr Bakovski or his wife: Mr Bakovski's first affidavit at [47].

Mr Bakovski said that he never retained or dealt with Accom Finance, nor to his knowledge had his wife.

Documents "GB1-7" to "GB1-13", the exhibits to Mr Bakovski's affidavit, are copies of documents subsequently received by the plaintiffs from ProPex Pty Ltd ("ProPex") a broker "Property and Finance Specialists": (a) A Loan Summary; (b) An Assets and Liabilities Statement; (c) A Loan Approval; (d) "Lo Doc Loan Customer Declaration"; and (e) Privacy Act 1988 and General Consent form.

Mr Bakovski said he recognised his signature on those documents. He said he did not know who ProPex was at that time and he had no recollection of signing the documents.

The Loan Summary of ProPex recorded Mr and Mrs Bakovski's personal details, in particular, their names, address, phone number, and additionally, particulars as to the security property. The value attributed to the security property in handwriting was $550,000. Under "First Mortgage Amount" there is a handwritten figure of $350,000.

In paragraph [4](a) of the document the purpose of the loan was stated in handwriting to be "for business purposes".

"GB1-9" is a "Loan Approval" on the letterhead of ProPex dated 11 August 2004. It records the plaintiffs' names and address and lists them as "borrower(s)". It also contains a description of the security property.

Document "GB1-14" records in handwriting the name "Bransgroves" and a copy of that document contains handwritten entries including, the name "Lenehan & Co Solicitors", and under that the name "James S. Arkoudis BA LLB Solicitor". Underneath that appears a date in handwriting, "13/8/04".

The ProPex documents containing the signatures of the plaintiffs bear the date 10 August 2004.

The document "GB1-15" dated 13 August 2004 records the name at the top of it, "Accom Finance Pty Ltd (Lender")".

It is entitled "Letter of Offer" and was addressed to the plaintiffs. The Letter of Offer is entitled "Re: Accom Finance Pty Ltd Mortgage Advanced to Bakovski".

The security property was noted.

The terms and conditions are then set out. They include the following:

At the foot of the Letter of Offer is the printed name of the first and second plaintiffs with their signatures.

On the second page of the Letter of Offer are clauses numbered 8 to 15 which I do not here set out. An Establishment Fee was specified as a fee of $12,746.25 including GST payable to Accom Finance Pty Ltd. A Late Redemption Fee is specified if the mortgage was discharged early for any reason, being a fee of $19,312.50.

The third page of the Letter of Offer contains clauses numbered 15 to 17.

It recorded the total amount payable for the loan, including the establishment fee, legal fees and stamp duty, at $17,410.25.

Document "GB1-18" is the first page of the Mortgage which contained an Office of State Revenue stamp dated 16 August 2004. The document was signed by the plaintiffs as mortgagors and the witness is specified as James Arkoudis whose signature appears above his printed name.

Annexure "A" to the Mortgage set out the date (16 August 2004), and the principal amount of the loan as $386,250, the term being 2 months, a lower interest rate of 60% per annum and a higher interest rate of 96% per annum, and the interest type as "compound". The expiry date is noted as 16 October 2004. The first instalment due date was specified as 16 September 2004. The borrowers were specified as the plaintiffs. The guarantors were specified as "N/A". The damages for Late Repayment were specified as $19,312.50. The document bore the signature of Matthew Bransgrove, solicitor for the lender and was signed off by the plaintiffs and by Mr Arkoudis as witness.

Mr Bakovski, in his affidavit sworn 22 November 2011, at paragraphs [54] and following provided an account of the events that occurred involving Mr Arkoudis whom he had not met prior to 13 August 2004.

He said that in about that month Mr Mitrevski came to his home and there was a conversation between Mr Mitrevski, his wife, and himself. He said: "Mr Mitrevski said: 'I have organised the finance. Let's go to my solicitor, Mr Arkoudis, for you to sign some documents.' I said: 'Ok.'"

Mr Bakovski then said that Mr Mitrevski, his wife and he all drove together into the Sydney CBD in Mr Mitrevski's car.

He said that Mr Mitrevski drove to York Street and stopped the car. Mr Mitrevski then handed him $250 in cash and said words to the effect of: "This is the money for my solicitor for the documents that you need to sign. Give the money to him. When you go in the office over there ask for Mr Arkoudis". Mr Bakovski then said "Ok".

Mr Bakovski said he did not take any loan documents with him to the meeting with Mr Arkoudis. Nor did he see his wife with any documents.

Mr Mitrevski dropped Mr and Mrs Bakovski off outside the offices of Lenehan & Co in York Street, Sydney.

Mr and Mrs Bakovski went up in the lift to the offices of Lenehan & Co. He said there he and his wife were introduced to the people sitting in reception. He asked to see Mr Arkoudis.

He said that Mr Arkoudis met them in the front reception area and directed them into an office.

He said that prior to this he had never met, retained, or dealt with Mr Arkoudis or Lenehan & Co, nor had his wife.

His account of what then took place is as follows: "62. Vera and I sat on two chairs that were situated in front of the desk that was in this office. Mr Arkoudis then brought some document over to the desk and said words to the following effect:- Mr Arkoudis said: "Sign there, there, there, there, there, there." 63. As he said this Mr Arkoudis was pointing to an area on the document that was in front of me and I signed the documents where Mr Arkoudis was pointing. Mr Arkoudis did not say anything to me about the documents. 64. I did not read the document that I was signing and I do not recall the appearance of the documents that I signed. 65. Mr Arkousdis [sic] then asked Vera to sign the documents. Mr Arkoudis did not say anything to Vera about the documents. 66. Mr Arkoudis did not say very much during the meeting. He did not talk to me or Vera about what documents we were signing. He just had us sign the documents and that was all. 67. Mr Arkoudis did not say anything other than "sign here" when we were signing the documents. He did not advise me what the documents were or what their effect was. It all happened very quickly. 68 I thought that Mr Arkoudis seemed very serious throughout the meeting. 69. At the time I did not read any of the documents and I didn't notice Vera reading anything. 70. I remember signing and initialling a number of times on the documents that Mr Arkoudis placed in front of me during the meeting on 13 August 2004. I signed the documents where Mr Arkoudis told me to sign them. I did not read them at all. As Mr Arkoudis placed each document in front of me on the desk he would point to the document and say "Sign there, sign there". 71. Mr Arkoudis did not read any part of the documents to me or Vera, or give any explanation about the documents or the reason that Vera and I were signing these documents. 72. Mr Arkoudis did not say anything to me about the fact that he would need my consent and my wife's consent to give both of us advice about the documents that we were signing. 73. Mr Arkoudis then asked me for identification, I handed over my licence. I think Vera brought passports and some other identification documents, but I don't know what they were. I then saw Vera hand the identification documents that she had brought to Mr Arkoudis. 74. Then Mr Arkoudis left the room with the identification documents and the other documents that Vera and I had just signed. I presume that he was photocopying the documents because a short time later, Mr Arkoudis returned to the room and handed back my identification. He also gave Vera back the identification documents that she had handed to him earlier. 75. At the end of the meeting, and immediately before Vera and I left the offices of Lenehan & Company, Mr Arkoudis handed some documents to Vera and said words to the following effect:- Mr Arkoudis said: "I don't ever want to see you again in my life. Take these documents to Bransgrove. Here is the address." 76. Mr Arkoudis then handed Vera a piece of paper. 77. Exhibited at "GB1-14" is a true copy of that document. 78. When Mr Arkoudis said this it did not seem like he was saying a type of a joke he looked and sounded very serious in the way that he said this. 79. Vera and I did not respond to Mr Arkoudis' comment. 80. At the time I didn't think much of what Mr Arkoudis said. 81. The meeting did not last very long and it seemed to me like Mr Arkoudis just wanted Vera and I to sign the documents all as quickly as possible and for us to be out of that office. 82. Vera and I then left the offices of Lenehan & Company and met Mr Mitrevski downstairs. Vera, Mr Mitrevski and I then went to the offices of Bransgrove Mortgage Solicitors ("Bransgroves") in Mr Mitrevski's car. This was only a short drive from the offices of Lenehan & Company. 83. Vera handed the documents to someone at Bransgroves and then we left and went back home. Mr Mitrevski was also present when the documents were handed over. 84. After this Mr Mitrevski drove us home. 85. I did not keep any documents from the meeting with Mr Arkoudis on 13 August 2004, and to my knowledge Vera did not retain any documents after that meeting either. 86. I did not keep any documents after attending Bransgroves, and to my knowledge Vera did not retain any documents after that attendance either."

Mr Bakovski then gave evidence in his affidavit concerning the "Crown & Gleeson Loan" which came into existence in late August 2004.

In paragraphs [90] to [94] of his first affidavit Mr Bakovski stated: "After this Mitrevski attended [XXX] Farr Street. On that occasion, Vera, Mr Mitrevski and I had a conversation to the following effect:- Mr Mitrevski said: 'Please I'm delaying with selling my properties. So that they do not taking your properties to repossess, can you give me another Deed to borrow money to pay off the Accom loan? If you give me another deed I can pay off 146 properties from Accom?' I said: 'Ok. We will help you. We will give you the deed to [XXX] Watkin Street'. Vera and I agreed to help him by giving him the Deed to the property at [XXX] Watkins [sic] Street for him to borrow more money in his own name. The Certificates of Title for all of our properties was always kept at my house because I had previous bad experiences with banks holding onto my title. I cannot remember if we gave him the deeds immediately or at a later date. To my knowledge Vera was the one who would have organised that. I was not involved in Mr Mitrevski organising this finance or loan. It was my understanding from my discussions with Mr Mitrevski that he was organising everything himself and that the loan would be in his name."

Mr Bakovski described an occasion that occurred later in August 2004. Mr Mitrevski came to the plaintiffs' home on this occasion. He subsequently drove them and their son, Nicholas, to an office in Parramatta where they met a man named Mr Alan Elbadar, whom they had not met before.

When they arrived at the Parramatta office and met Mr Elbadar, Mrs Bakovski produced a number of identification documents and asked "why do we need all these documents?" He could not remember Mr Mitrevski's response. This meeting related to a further refinancing/loan transaction.

A discussion took place between Mr Elbadar and Mr Mitrevski. After that Mr Mitrevski said, "we need to go to Manly to see some people".

Mr and Mrs Bakovski and their son Nicholas then travelled to Manly in Mr Mitrevski's car. Mr Elbadar travelled to Manly in his own car.

Subsequently, on about 26 August 2004, Mr Bakovski said he met a man who he believed was a broker who came to their home and met with him and his wife. His name, he thought, was "Walter". He could not remember his surname.

"Walter" arrived alone. On entering the house there was some general conversation. They did not talk about Mr Mitrevski or about any loan at that stage. "Walter" had some documents with him. Subsequently, Mr Mitrevski and Mr Elbadar arrived and they sat in the dining room. Mr Mitrevski did not stay long. After he left, there was discussion between Mr Bakovski and his wife and Mr Elbadar and "Walter" to the following effect: "Mr Walter said: 'I'm a little early so we will wait for the others to arrive. I'm coming to get the documents signed for Mr Mitrevski. Mr Mitrevski wants to borrow money. I need you to sign some documents'. I said: 'Ok'." (at [111])

Mr Bakovski said he then signed some documents during the meeting, being the documents that "Walter" had brought with him. He did not know what the documents were. He said he did not read anything and none of the documents were read or explained to him.

He said he did not receive any legal advice in relation to these documents, nor to his knowledge, did his wife. He said it was never suggested by anyone that they should obtain legal or financial advice before signing the documents. There was no interpreter present at the time of signing the documents.

Mr Bakovski said that he believed that in signing them he was helping Mr Mitrevski to get a further loan in his own name.

He said they were not given the documents they signed to read, nor did his wife read the documents. He said he thought that Mr Mitrevski was borrowing the money, not him or his wife.

Exhibited to Mr Bakovski's affidavit were documents "GB1-29" to "GB1-198". These documents include copies of a mortgage to Crown & Gleeson Securities Limited, and other documents as specified in paragraph [118] of his affidavit.

Mr Bakovski said that after the meeting Mr Mitrevski had come to see him and his wife and said: "Now we have to go to the city to get the money. We need to transfer the documents to give them the Deeds to get the money": Mr Bakovski's first affidavit at [123].

Mr Bakovski in his affidavit sworn 22 November 2011 at paragraphs [132] to [134] set out the service of documents concerning the possession proceedings brought by Accom in respect of the Accom loan.

Mr Bakovski was mainly cross-examined in English although an interpreter was available to assist as required. Such assistance was necessary on only limited occasions.

He therefore was capable of giving evidence in English with some limitations on matters of expression.

A number of issues were raised with him in cross-examination. These included: (i) His property acquisitions, including his dealings with solicitors in relation to loan/mortgage transactions. (ii) The plaintiffs' financial position in 2004. (iii) His association and dealings with Mr Mitrevski. (iv) His acceptance of Mr Mitrevski's assertions concerning the Malua Bay project, the number of units allegedly sold and the number of units remaining, without having obtained verification of the matters asserted in relation to that project. (v) His dealings, if any, with LaTrobe (finance company). (vi) His attendances on the following occasions:

Mr Bakovski presented, as earlier indicated, as a relatively unsophisticated man. In giving evidence he appeared at times as earnest in his responses to questions in cross-examination. I gained the impression that he was reasonably direct in answering questions and did not demonstrate evasiveness.

In cross-examination it was put to him that in 2004 he and his wife had some financial hardship. He disagreed: T 22:40-50.

He agreed that they attended on Mr Hastie in the first six months of 2004, but would not agree that he conveyed to Mr Hastie that they were experiencing financial hardship.

He agreed that they had taken out a loan from LaTrobe Finance but could not remember when that occurred. It was some time before the Accom loan: T 23.

His attention was taken to a letter from he and his wife addressed to Mr Hastie dated 13 July 2004: Exhibit 1 at p 39. In that letter, they had stated that his help was of great assistance to them and referred to the fact that they wanted him to help because he knew of their financial hardship which they had discussed many times before. There was in fact no evidence in the form of financial or banking records that established that the plaintiffs at that time had any financial difficulties or pressures. They owned more than one unencumbered residential property.

On the question put to him suggesting financial difficulty, Mr Bakovski responded by saying that was a matter for his wife to answer as he indicated that he did not know what was being referred to.

He agreed that in early 2004 he had some problems with the local council at Belmont: T 26. He said that at that stage that Mike Hastie suggested that they engage a Newcastle lawyer, Mr Nick Coren, in relation to that matter: T 27:1-20.

He agreed that prior to 2004 he and his wife had entered into mortgages with different companies and that they had used a solicitor, Mr LJ Sharpe, over a period of many years: T 27.

In May 2004, the council had sent letters requiring the plaintiffs to clean up the Belmont properties: T 28:10-15.

In relation to Mr Mitrevski, he said that he and his wife had been good friends with Mr Mitrevski's sister. He said that he was the best man for his sister and that by marriage he was related to Mr Mitrevski who he knew as George Mitrevski: T 29.

He agreed that Mr Mitrevski had come to him and proposed a deal whereby he would buy Belmont. He said he trusted the man: T 30:40-50.

It was put that part of the deal was that Mr Mitrevski would pay the money back. Mr Bakovski agreed with the proposition that Mr Mitrevski said he would pay it back on the basis that he had a development at Malua Bay.

He said he had never seen the Malua Bay project and did not ask for confirmation to prove that he in fact had a development. He did not seek any confirmation that he had, as he had asserted, sold 18 townhouses, did not seek proof that he had in fact owned those townhouses, nor proof that he had more to sell: T 31:25-50. When asked why he did not, Mr Bakovski responded: "A. Because he told me what he told me, that's it. I trust him and I believe it. I think he's a family man so he's not going to trick or he's not going to do something silly." (T 31:45-50)

He agreed that he understood what a mortgage was in 2004.

It was put to him that before he went to see Mr Arkoudis on 13 August 2004, he or his wife had given Mitrevski a Certificate of Title: T 32:5-10. I have earlier referred to the fact that Mrs Bakovski did give a Certificate of Title to Mr Mitrevski.

He said he could not recall having given Mr Mitrevski copies of his driver's licence.

It was put to him that before he saw Mr Arkoudis on 13 August 2004, Mr Mitrevski had given him a number of documents to sign. Mr Bakovski responded: "A. Not Mitrevski never give me nothing, just Mitrevski took me to York Street on front of the Lenehan office and give me - when we went to there, stopped the car and Mr Mitrevski gave me $250 and he said 'This money, give it to my solicitor, Arkoudis'." (T 32:25-30)

He said he could not remember Mr Mitrevski giving him any documents before that day. In particular, he could not remember receiving any blank documents from him: T 32:25-40.

He agreed that when Mr Mitrevski asked to borrow money he said that he would be selling some properties to repay the loan monies and in that context the plaintiffs agreed to offer one of their properties as security: T 33:1-6.

When it was put to him that he understood that if Mr Mitrevski did not repay the loan the finance company could take his property, Mr Bakovski responded: "Not on that time because I trust him and that's why I gave my deeds." (T 33:5-15).

It was put to him that he understood that if Mr Mitrevski did not repay the loan the finance company would take his property. He responded: "A. On that time I never think about what you ask me. Because I was trust him and how they say is going to pay me everything with no problem because he's got so many units in already, another 18 to finish off. But now, it's different. I can understand. Q. Whether you thought about it or not when you gave Mr Mitrevski the certificate of title for the loan you understood that if he did not repay the loan the finance company would take the property? A. That time I didn't recollect what going be in the future." (T 33:10-25)

He said that he understood that if loan monies were not repaid then the mortgagee would take action but at the time he thought differently and confirmed that he trusted Mr Mitrevski and in particular, he trusted him to repay the money: T 33:25-35.

He was then questioned on the visit to Mr Arkoudis on 13 August 2004. He agreed that he signed a number of documents with Mr Arkoudis present. He was then asked: "Q. Did you ask Mr Arkoudis what was in the documents you were signing? A. I never ask. Q. Why not? A. Was no interest. That was Mitrevski papers and I was not have any interest. Because we're in the hands of the lawyers, that's it. Q. When you say you are in the hands of the lawyers, do you mean in the hands -- A. The lawyer who's going to represent the papers, they should explain to you what ever is made or not, whatever. Q. And why should the solicitor explain that to you? A. Because that papers is not belongs to me ... Q. And you believe the lawyer's job was to explain what was in the papers that you signed? A. Well, if you're a professional you should explain to people because that is not in my trade ..." (T 34:5-30)

Mr Bakovski later stated that he believed that lawyers should explain what is "in the papers" and considered that that was important.

He was then asked as to why he did not ask Mr Arkoudis to explain what was in "the papers", to which he responded: "A. I never ask the lawyer. I never asked the lawyer to please, for that papers because that papers was Mr Mitrevski papers we talking about. Q. But you were signing them? A. That's why I said I didn't know what kind of papers we sign. That's where the lawyer should explain to me. This papers is on new name to get the loan, not Mitrevski. But I give him the deeds to Mr Mitrevski to get the money for his own way, not Mr Bakovski get the loan. Because I don't need the money. I've got the property to sell, nothing else. But Mitrevski ask me to help him, we help him. But not on this way what Mr Arkoudis doing with Mr Mitrevski. That we should understand, everybody. Very easy for to you tell me what you say but if you been in my position then I'm going to ask exactly and you tell me who's right, who's wrong ..." (T 35:1-25)

In a number of other answers Mr Bakovski repeated that he considered that the documents did not belong to him but that they belonged to Mr Mitrevski. See, for example, T 35:34-50 to T 36:1-10.

Mr Bakovski was taken to the "Acknowledgment of Legal Advice by Borrower": (Exhibit 1 at p 51), and to the "Declaration by Borrower" Exhibit 1 at p 55.

It was put to him that he, before signing the document, would have seen the word "borrower" in the heading of the document "Declaration by Borrower": "Q. And when you signed this page you saw the word "Borrower" at the top? A. I never saw nothing. Just signed. "Sign here", "Sign here", "Sign here", "Sign here", thank you." (T 36:40-50)

A little later it was put to him: "Q: And you understand the word "borrower" in this document was talking about you borrowing the money from Accom Finance? A. They should be for Mitrevski, not for us ..." (T 37:35-40)

A little later it was put to him: "Q. When you read this document now in the witness box you know it is talking about you and your wife being the borrowers of the money? A. Yes. Q. And if you had read this document in front of the solicitor in 2004 you would have understood that you and your wife were the borrowers? A. Correct." (T 37:45-T 38:1)

Mr Bakovski in his evidence indicated that irrespective of what the documents said, "we never have independent legal advice": T 38:6.

Later when it was put to him that there was nothing stopping him from asking the solicitor, Mr Arkoudis, questions about the documents, Mr Bakovski repeated that they trusted Mr Mitrevski and that the papers "belongs to him. That's it": T 38:35-36, and at T 40-42.

It was put to him that Mr Arkoudis gave him advice, to which Mr Bakovski responded, "He never told me nothing": T 43:25-26. A series of questions were put to him as follows: "Q. He told you that the interest rate of 60 per cent was ridiculous? A. He never told me nothing, thank you. Q. And you told him you needed the money, otherwise you were going to lose a business opportunity? A. That is not true. Q. And he told you that if you signed those documents you were, in effect, signing up to lose your house if you didn't make the repayment? A. He never said nothing. Q. And then he explained what was in these documents before you signed them? A. He never explained nothing. Q. You told him that you wanted him to hurry up? A. For what? Q. He told you this was not a good deal? A. He never said nothing, thank you. Q. He told you that he could write to the solicitor and ask for some changes to the documents that made it easier for you? A. Never said nothing, thank you. Q. He said to you that maybe you could negotiate some better terms? A. He said nothing, thank you. Q. And then you said to him, "No, we have to hurry up. We don't want to get into legal games and waste more time"? A. I never said that, thank you." (T 43:25-T 44:1-6)

Mr Bakovski was asked as to whether he understood what amount of money was being borrowed: "Q. ... And can I ask this question: when you saw Mr Arkoudis, did you know how much the loan was for? A. Can we understand this: I never ask for money. I never borrow any money. And how can I know what the figure is? This is a commonsense. Q. All right. Putting aside who the loan was for, just -- A. I didn't know nothing about it. Q. ... You believe Mr Mitrevski was borrowing money? A. Correct. Q. And did you know how much he was borrowing? A. I don't know nothing about it." (T 55:33-47)

He said that when he saw Mr Arkoudis he believed that he and his wife were providing security for Mr Mitrevski's loan: T 56:10-15.

He agreed that in the past he had taken out several loans to purchase property and that he had repaid every one of the loans: T 57:5-10.

He agreed that he and his wife had unsuccessfully attempted to sell the Belmont properties for many years up to 2003: T 58:40-50. He agreed that the property had been vandalised: T 59:25-30.

He agreed that in early 2004 he had some financial difficulties which arose out of council chasing him for some money to pay for the cleanup of the Belmont properties: T 60:10-20.

He also agreed that Mr Mitrevski told him that he was prepared to buy the properties and that he asked for a price of $5 million and that Mr Mitrevski had said "No, I want to buy them for $7 million": T 59:40-50. Mr Bakovski said that he thought that the Belmont properties were worth more than $7 million, but that he had offered $5 million in order to "get out of that problems": T 60:1-5.

He also agreed that he was prepared to do anything to make a deal with Mr Mitrevski: T 60:30-35. He said that he understood that Mr Mitrevski needed the money to complete the Malua Bay development and the only way he was going to get it was if the plaintiffs helped him in some way: T 60:40-50.

He said that he was going to do anything he could to help Mr Mitrevski get the money: T 61:1-5. However, he said he did not consider this was the only opportunity to make so much money from the properties at Belmont: T 61:5-10.

It was put to him that he was uninterested in the amount of money that Mr Mitrevski was seeking to borrow and that was because he was 100% determined to make sure Mr Mitrevski got his money, to which Mr Bakovski replied "Because I tried to help him to give the debts, nothing else": T 61:15-21.

Mrs Bakovski was born on 11 November 1944 in Macedonia. She arrived in Australia on or about 13 April 1962.

Mrs Bakovski was educated in the Teachers' College in Bitola, Macedonia. She completed two years of this course but did not complete the remaining two years because she migrated to Australia.

She confirmed that she met her husband in 1967 and they married on 3 June 1968 and had two children.

She stated that her husband is not proficient in the English language. Her evidence is that he has a lot of difficulty reading English and often needs her to read and explain any document that he reads in English for him. She said that her husband has a lot of difficulty understanding words spoken in English and said that she often explains things to him in Macedonian, as he is better able to understand things that way.

She said that she and her husband speak Macedonian at home and they also do so with their children. Sometimes they use English words that they know if that is easier, but that is not often.

Mrs Bakovski said that her proficiency speaking English is good. However, she said that she finds it difficult to read and understand written English, especially if the words and sentences are long or complex. She said, however, that generally she can read and write in English reasonably well although she said she often misspells some words or she does not fully understand the meaning of complex words or sentences that are in English.

Mrs Bakovski said she attended Beginners English classes at Arncliffe in 1962 for approximately two months. She worked in the Streets Ice Cream Factory in Turella NSW for about one year. She said that she then moved to the position of Quality Control Officer for about seven years. When she was pregnant with her daughter she stopped working in about May 1969. She did not work for a few years after that.

Mrs Bakovski presented as an intelligent and articulate witness. She readily understood what was asked of her in cross-examination and, I considered, that she answered questions without any sign of evasion or obstruction. Overall I considered that she presented as a very genuine person.

Mrs Bakovski has had a lengthy history in the work force. In the early 1970s she began working for Turner Brothers in Kogarah, Sydney, as a cutter for a manufacturer of curtains.

In 1979 she commenced work with Youngers Jewellery . She worked there for 15 years.

Since leaving Youngers Jewellery in about 1990 she has not worked on a full-time basis, except for a five-year period when she worked as a casual assistant at a nursing home in Kogarah, working there three days per week.

Mrs Bakovski set out the history of the property acquisitions by her husband and herself commencing on or about 22 December 1987: Affidavit of Mrs Bakovski sworn 22 November 2011, at [15] to [38].

Mrs Bakovski said that she and her husband have lived in their own home in the one suburb since about 1968.

She said that in about 1994 they became interested in selling the Belmont properties and retained an agent for that purpose. She said she also retained Mr Sharpe, solicitor, to prepare contracts for the sale of the properties. She could not recall how much money they were asking for them at that time. They did not get any offers to purchase the properties.

After 1994 they retained another agent to market the properties. They continued to market the property between 1999 and 2003. However they did not receive any offers that were acceptable to them.

Mrs Bakovski gave an account of the party she and her husband attended on or about 13 September 2003 at the Jovanovski household. She stated that Vesela Jovanovski, who was the sister-in-law of George Mitrevski (also known as Robert Mitrevski) was a family friend.

Mrs Bakovski then set out a history as to the events that thereafter took place with Mr Mitrevski expressing interest in the Belmont properties: at [52]-[60].

Mrs Bakovski referred to a meeting that took place following payment of the $100,000 "deposit" by Mr Mitrevski, and prior to August 2004, at their home. In that conversation Mr Mitrevski stated: "I need you to help me to finish off my Malua Bay development. I am building 36 town houses at Malua Bay. I've finished 18 of the town houses and I've got another 18 to finish off. In October I'm expecting to finish Malua Bay and when it's finished I'll give you another $300,000 deposit towards Belmont. I am expecting to be able to pay you this money in October": (at [66]).

She said that her husband replied: "Ok, we will help you".

Mrs Bakovski said Mr Mitrevski then said: "I need you to give me money on one of your properties. I want to borrow money on one of your properties so that I can finish my Malua Bay development".

She said her husband replied: "Ok, we will let you use the deeds to [the Rockdale property] so that you can borrow the money".

She said Mr Mitrevski then said that he would organise everything and pay off all the expenses and that he would be responsible for "everything". He additionally said that he would borrow the money in his name and that the plaintiffs did not need to worry about a thing and did not need to get involved. Mr Mitrevski said that he would pay all the costs and interest and would claim it on his tax, he having, he said, so much tax to pay: at [66].

Mrs Bakovski, in her first affidavit sworn on 22 November 2011, referred to documents brought to her and her husband by Mr Mitrevski, and in paragraph [77] she listed the "ProPex" documents. She said she did not have copies of the documents in her possession in about August 2004 and that it was not until about 8 November 2004 that she and her husband obtained copies of the documents from a Ms Thanudchang who was associated with ProPex: at [79]-[80].

Mrs Bakovski said that she did not, nor to her husband to her knowledge, engage ProPex to seek any finance for them. She recalled giving a copy of her husband's driver's licence to Mr Mitrevski and a copy of the Certificate of Title for one of their properties in response to a request from Mr Mitrevski to do so.

Mrs Bakovski in her first affidavit gave her account of the meeting with Mr Arkoudis on 13 August 2004: at [88]-[121].

Mrs Bakovski stated that prior to 13 August 2004 Mr Mitrevski contacted her and her husband saying that he had organised the finance and was going to pick them up and take them to see his solicitor to sign some documents: at [89].

She said that on 13 August 2004 Mr Mitrevski picked them up and took them to Sydney CBD. He told them that he was taking them to see his solicitor to sign documents.

He then handed $250 in cash to her husband. She said that on arrival at the offices of Lenehan & Co they introduced themselves to two females in the reception area and asked to see James Arkoudis. She said she had never heard of, met, retained, or dealt with Mr Arkoudis before this time, or with his firm, nor to her knowledge had her husband.

She said that Mr Arkoudis spread out some papers on the desk. She and her husband sat in two chairs in front of the desk. Mr Arkoudis sat in the chair behind the desk facing them.

He placed the papers in front of her on the desk and said words to the effect, pointing to the documents, "Sign here".

She said that he repeated these words, pointing to particular parts of the documents, and she continued to sign until Mr Arkoudis told her that she did not need to sign any more: at [96].

After she completed signing the documents she then saw Mr Arkoudis follow the same procedure with her husband, saying "Sign here" a number of times, pointing to the areas in the documents where he was to sign. She saw her husband sign them as directed.

She said that neither she nor her husband read any of the documents. She said she did not recall the appearance of the documents they signed: at [98].

According to her evidence, Mr Arkoudis did not ask her to read any of the documents. He did not ask her to write anything other than her signature on each page as directed: at [99].

She said that Mr Arkoudis did not provide any explanation about the documents. She said "Mr Arkoudis did not say very much during the meeting, and the meeting was very rushed": at [100].

After signing the documents she recalled Mr Arkoudis said words to the effect "I want you to give me your IDs. I need as many as you have". She agreed. He then took her identification documents and those of her husband. He left the room, went into the adjoining room with them, taking the documents that they had just signed as well. She believed that the identification documents consisted of her Australian passport, her husband's Australian passport, his driver's licence, and their Medicare card.

A short while later Mrs Bakovski said Mr Arkoudis returned to the room and that when he came back he was holding a bundle of papers in his hands. He handed the papers to her and said words to the effect, "Here are the papers. These are the papers for you to take to Bransgroves": at [104].

She said that Mr Arkoudis then took a pen in his hand and began to write something down on a piece of paper. He handed the piece of paper to her and said words to the effect: "Take the documents to Bransgroves Solicitors. You will meet a girl called Aida. You should give them the documents. Once you walk out of here, I never want to see you again in my life."

Ms Bakovski annexed to her affidavit (VB 1-288) a copy of a note which she said Mr Arkoudis handed to her as well as a copy of his business card.

She said, "I found it strange that Mr Arkoudis would be saying something like this but I did not respond": at [107].

She also said that during the meeting Mr Arkoudis did not discuss the amount of money that was being borrowed. She said he did not mention the rate of interest or the penalty rate of interest in the case of any default. She said he did not say anything during the meeting about her and her husband obtaining independent advice: at [108].

Mrs Bakovski said that her understanding, based on the discussions with Mr Mitrevski, was that Mr Mitrevski was taking out a loan from the finance company in his own name and that she and her husband were helping him by providing him with the Certificate of Title to one of their properties as security. She said it was her understanding that she and her husband were going to be in the position of guarantors with respect to the finance that Mr Mitrevski had arranged. She said that she thought Mr Mitrevski was taking the whole of the responsibility for the loan himself and she did not think that she or her husband would be liable for the loan: at [109].

She did not recall any discussion during the meeting with Mr Arkoudis of what she referred to as the "arrangement" that she and her husband had agreed to with Mr Mitrevski.

Mrs Bakovski said that the meeting on 13 August 2004 with Mr Arkoudis lasted for about 15 minutes. She said it was not a very long meeting.

Mrs Bakovski said that Mr Arkoudis did not provide them with any advice on the effect of the documents they signed or advice on the terms of the loan or the arrangements with Mr Mitrevski.

She said that Mr Arkoudis did not advise them that they were borrowing money from Accom: at [113].

Mrs Bakovski said that Mr Arkoudis did not advise them that they, rather than Mr Mitrevski, would have to repay the loan, nor did he advise them that they would be liable to make interest payments on the loan: at [114].

She also stated that he did not advise that they would be liable for penalty interest if they did not make interest payments and repay the loan on time: at [115].

In paragraphs [116] to [121] Mrs Bakovski stated that Mr Arkoudis did not give them advice on a number of matters including the following:

Mrs Bakovski also stated that in August 2004 she and her husband did not need to borrow the money under the loan with Accom: affidavit at [132].

In paragraph [122] of her affidavit, Mrs Bakovski took issue with a number of matters referred to in paragraph [13] of the Defence of the first and second defendants.

She said that it was not until Mr Hastie became involved that she or her husband obtained documents in relation to the Accom and Crown & Gleeson loans. Prior to that, she said she did not understand that she had dealt with Accom, nor had her husband to her knowledge.

She said that had she and her husband been told that they were named as the borrowers on the loan documents and that they were borrowing the money, she would not have signed the documents. She also said that had she known that she and her husband would be required to pay the loans themselves in a short period of time, or had they known of the high interest rate to be charged she would not have signed the documents.

After the conference with Mr Arkoudis, Mrs Bakovski said that she and her husband met up with Mr Mitrevski who was waiting downstairs in the car for them. He then took them to the office of Bransgroves Mortgage Solicitors where she handed over the documents that Mr Arkoudis had given her: at [135].

Mrs Bakovski said that some time prior to 25 August 2004 Mr Mitrevski approached them and said words to the effect: Mr Mitrevski: "Can you please help me, I am having problem in my development at Malua Bay and I am not able to get the money to finish it. Can you help me so Accom will not take your property?" Mr Bakovski: "Ok. We can help you." (at [139])

Mrs Bakovski said that on 25 August 2004 Mr Mitrevski took her and her husband to Parramatta to meet a mortgage broker named Allen Elbadar. She said their son Nicholas also came to the meeting at Mr Elbadar's office at Parramatta. She saw a number of papers on his desk including copies of her identification documents and those of her husband's. When she saw this she asked Mr Mitrevski "When did this man get all our identification". Mr Mitrevski said "I don't know": at [143].

She said that they did not sign any documents while at Mr Elbadar's office. She said the meeting did not last long. Shortly after arriving at the meeting she said that Mr Elbadar had said "We need to go to Manly for a meeting".

She said that Mr Mitrevski, her son, her husband and her drove to Manly in Mr Mitrevski's car. Mr Elbadar met them at Manly.

They waited for some considerable time but did not sign any documents at Manly on that occasion. She said that before they left, Mr Elbadar said "We are having some problems finding finance": at [149].

On 26 August 2004, Mrs Bakovski said she received a call from Mr Mitrevski telling her that he had made some arrangements for a man named Walter to come to the plaintiffs' home to sign some documents.

On 26 August 2004, Walter Reinhard came to their house and sat with her and her husband in the dining room.

Before Mr Elbadar and Mr Mitrevski arrived, Mr Reinhard spread some papers out on the table in front of them.

She said that she understood from the conversation between Mr Mitrevski and Mr Elbadar that arrangements had been made with Mr Reinhard to get more money for the Malua Bay development. She understood that he was going to borrow more money in his own name and that he was going to use their property as security: at [155].

She said that when she and her husband were with Mr Elbadar and Mr Reinhard (Mr Mitrevski having left at that time), Mr Reinhard pointed to the documents and asked her to sign in different places. She and her husband then signed them. She said that no explanation was given by either Mr Reinhard or Mr Elbadar about the documents that they signed: at [159]. She said she did not read any of the documents nor, she believed, did her husband: at [160].

On 27 August 2004, Mr Mitrevski came to the plaintiffs' home and said that they needed to go to the city to sign documents. He asked Mrs Bakovski to bring another deed with her in case they had problems with the loan: at [164].

Mrs Bakovski said she did not say anything in response, but just went inside and took their Certificate of Title for one of their properties.

She and her husband signed documents with Mr Reinhard's female assistant pointing out what documents to sign. The assistant asked for the "deed for the house" and Mrs Bakovski handed the Certificate of Title to her for a property she and her husband owned. She said she did not recall what the documents were that she and her husband signed on that occasion: at [171]. She said she did not read the documents that she was asked to sign, nor did her husband, and there were no discussions about them or their effect: at [173].

Mrs Bakovski stated that on or about 30 August 2004 she went to see Mr Sharpe, solicitor. She told him that she and her husband had assisted Mr Mitrevski getting finance for his Malua Bay project. On that occasion Mr Sharpe told her it was too late and queried why she had not come to him earlier. He indicated that he could prepare an Acknowledgment of Debt for Mr Mitrevski to sign: at [185].

Prior to 9 September 2004, she told Mr Mitrevski that she had organised with her solicitor to prepare papers for him to sign. He indicated that that was "Ok": at [187].

She said that subsequently Mr Mitrevski signed the Acknowledgment at her home on 9 September 2004.

On 6 October 2004, she and her husband were served with a Statement of Claim by which Accom sought orders for possession of the Rockdale property.

Mrs Bakovski gave an account of having met with Mr Hastie, a finance broker, on or about 12 or 13 October 2004 and explained the then existing situation to him: at [208]-[211]. She stated that it was only when she and her husband saw Mr Hastie that she realised that they were the borrowers named on the loan documents, based on what Mr Hastie had told them: at [212].

On or about 20 October 2004, the plaintiffs obtained conditional approval for a loan from Liberty Financial Pty Ltd ("Liberty Financial") and in due course the loan was settled on 10 December 2004.

On 14 September 2005, proceedings were commenced by the plaintiffs against Mr Mitrevski who did not defend the proceedings. Default judgment was obtained against him on 7 April 2006.

On or about July 2006 Mr Mitrevski filed a Notice of Motion to set aside the judgment that had been entered on 7 April 2006.

In about September 2007, the loan from Liberty Financial was refinanced by two loans from Advance Investment Finance No 2 Pty Ltd and Eurofinance Capital Ltd.

On 9 February 2009, Eurofinance obtained an order for possession in relation to two properties that were then owned by the plaintiffs.

Mrs Bakovski rejected in cross-examination that in the first half of 2004 she and her husband were experiencing financial hardship. She stated: "Not to extend [sic] the, that we had to borrow extra or something" (T 69:1-2). Later in cross-examination she said that they had some financial hardship in July 2004: T 94:20-25. In that respect there was a note in a letter from the plaintiffs to Mr Hastie: Exhibit 1 at p 39.

In May 2004, it was put to her that the local council for Belmont had written about cleaning up the Belmont properties that would cost money to attend to: T 69. However, the evidence did not establish that this resulted in financial hardship.

As to properties purchased by the plaintiffs over the years before 2004, Mrs Bakovski said that Mr LJ Sharpe had acted for them. Such purchases entailed loans but she said "not loans like this, through the banks": T 70:20-21. She agreed that they had given security for loans and understood that default under the loan could result in the lender taking the property used as security. Mrs Bakovski was asked questions in cross-examination about her experience in dealing with solicitors. In particular she was asked: "Q. Before August 2004 did you believe, if you were signing a document in front of a solicitor, the solicitor should tell you what was in the document? A. Of course I do believe. It's his obligation. It's a care of duty. Q. And did you believe that any solicitor who watched you sign a document had to explain what was in the document? A. Yes I do. Q. Without any exceptions? A. Exactly. Q. Any document of any description? A. Exactly. Q. Please let me finish? A. Sorry. Q. That's all right. You believe that whatever the document was that you signed in front of a solicitor, his duty of care was to explain what was in the document to you? A. Yes I do. Q. To make sure that you understood what you were signing? A. Yes. Q. 100 percent? A. 150 percent. Q. And you went to see Mr Arkoudis on the 13 August 2004? A. Yes. Q. And in your affidavit you say Mr Arkoudis did not give you any explanation of the documents you signed? A. No. Q. Now when you signed those documents in front of Mr Arkoudis you believed he should have told you what was in those documents? A. Exactly. Q. 100 percent? A. That's right. Q. And did you ask him? A. I didn't. Q. I'm sorry? A. I'm sorry. Q. That's all right. When he did not explain anything to you, did you ask him to explain to you? A. We didn't ask because we had no interest at that time for those documents. Those documents supposed to be for Mr Mitrevski, but not for us. Q. I am sorry to cut you off? A. No, you didn't. They were supposed to be, the loan that we were helping Mr Mitrevski was supposed to be in his name, not in our name and we had no concern sort of. Q. But you were signing documents in front of a solicitor, correct? A. Correct." Q. And you believed 150 percent that his duty of care was to explain to you what was in the documents? A. Exactly. Q. And he did not do so? A. He didn't. Q. Did you ask him? A. We didn't ask him. I told you the reason why we didn't ask him. Q. I am sorry, did you say to him "it's your duty of care to explain to me what is in the documents I am signing"? A. I was going with knowing that we are signing a document for Mr Mitrevski to borrow money on one of our properties. Q. Did you say? HIS HONOUR Q. You finish? A. And we didn't think there was no need because we, you know, we were not borrowing money. CURTIN Q. But you told his Honour that you expected any solicitor to explain to you any documents which you signed without exception, is that true? A. Yes. Q. Well in front of Mr Arkoudis there were documents that you were signing? A. Yes. Q. Did you ask him "please explain"? A. We did not ask him. We had no reason to do that. We signing a loan for Mr Mitrevski to borrow money on one of our properties. Q. Well the reason was that you have told his Honour you believed a solicitor should explain to you every single document you signed? A. Now I know. If I was going to Mr Arkoudis's office now, I would know what to say. At that time I was too naive and Mr Curtin don't forget I am 70 years of age. I am still from the old book. I trust people, particularly legal people. When I am in a solicitor's office I don't think he could do wrong. I think I am in good hands. I am in safe hands. I would never in my dream think of solicitors could do this to me. Because Mr Mitrevski send us, "this is my solicitor. Go there, sign, you have to sign some papers for me. Here's $250", he gave it to my husband "and give it to him". Never in a million years would it occur to me that solicitors could do this or any legal practitioners." (T 73:17-T 75:24)

Mrs Bakovski was cross-examined on a letter signed by her sent to the Legal Services Commission dated 9 July 2010 (Plaintiffs' Tender Bundle, Exhibit A, vol 6 at 1339). Mrs Bakovski was asked about statements within the letter. She said she did not type the letter: T 76. She said that she had been asked to sign it. She said the letter had been typed by friends, Peter Andrew and Sue Phillips, both of whom she said had been "helping me along with my case": T 78:14-15. She said she met Mr Phillips at a group of people like her which she described as "legally abused people" and Ms Phillips also belonged to the group: T 78:20-30. She said she did not read the letter.

Mrs Bakovski was taken to the letter at Exhibit A, vol 6, p 1343, which states: "The blame appears to sit squarely on the shoulders of Bransgroves, the solicitors for the finance company who processed the loan for Mr Mitrevski and his company Demar which Lenehan & Co, the solicitors who acted for us had advised us against."

It was put to her: "Q. And you were telling the Commissioner that Lenehan & Co had advised you and your husband against entering into the loan?" A. Not orally." (T 80:1-5)

An objection was raised at this point by Mr Finnane who observed that it was apparent that Mrs Bakovski in the letter was setting out points that had been raised for comment by the Legal Services Commissioner in his letter, as was apparent from the last paragraph at p 1342. Mr Curtin properly acknowledged that there were contradictory statements by Mrs Bakovski in the letter and he then proceeded to deal with each in the order set out in the letter: T 80-83.

Earlier in the same letter, Mrs Bakovski was taken to a statement at Exhibit A at p 1342 as follows: "It was on 11 July 2008 when we obtained the evidence we needed to file the complaint against Bransgroves and James Arkoudis and we were able to inspect the documents we had signed when we were made the borrowers without our knowledge having no advice from Mr Arkoudis other than to sign the documents for the loan to Mr Mitrevski."

Earlier in the letter at Exhibit A at p 1339 a further statement appears as to the absence of advice: "Mr Arkoudis did not discuss this with us since we were unaware that we had been made the borrowers for the loan instead of Mr Mitrevski."

Mrs Bakovski was then taken to the contradictory statement referred to above at Exhibit A at p 1342. When cross-examined further on the statement, she said it was not conveying that she had remembered that Mr Arkoudis told them not to enter into the loan: T 88:1-12.

Mrs Bakovski agreed in cross-examination that she or her husband had given the Certificate of Title to the property to be used as security and had signed blank forms. She was asked why she signed the forms without having read them. She replied: "A. Because we trusted him. We thought he is telling the truth. He said "I will organise everything and, you know, you don't have to worry about it. I will be responsible to pay the full amount and for the interest". He says "I have got so much tax to claim" he said that, you know, "I am going to claim it on tax". Q. Did you trust him because your family was close to his family? A. Well not necessarily. We trusted him because you know we thought we know him and we knew he was developing properties as well. We have heard before from the family and of course more than anything you think you know him. We had known him for a long time. Q. How long had you known Mr Mitrevski? A. Since 83 or 84. Q. And how well did you know him? A. We don't have contact very often but we do know him. We do have contact with his sister on a very regular basis but not with him, but we do see each other on occasions like parties and things like that. Q. According to you Mr Mitrevski would borrow the money but one of your properties would be security? A. Yes. Q. For the Accom Finance loan, meaning that if Mr Mitrevski did not pay the loan the finance company could take your property? A. Yes. Q. And did you ask Mr Mitrevski for any proof that he could repay the loan? A. He did not. He said he was doing development in Malua Bay with 36 townhouses or whatever. He finished 18. He had another 18 to finish and we thought we were fairly secure and we know the man, he wouldn't tell lies. Trust is more than anything that we believe in. Q. And did you ask him for any proof? A. No we didn't. Q. That he had a development at Malua Bay? A. We did not. Q. Did you ask him for any proof that he had sold some? A. No. Q. Properties at Malua Bay? A. No. Q. Did you ask him for any proof that he had other properties to sell? A. No. Q. Did you ask him for any proof that he could repay the Accom Finance loan? A. No. Q. Did you ring up Mr Hastie and ask him about the lending to Mr Mitrevski? A. No, we were trying to ring Mr Hastie afterwards when- Q. I am not talking about afterwards? A. Oh, sorry." (T 89:41 - T 90:47)

Mrs Bakovski was asked why she had not consulted Mr Hastie: "Q. If you had told Mr Hastie what Mr Mitrevski had told you and Mr Hastie had said to you "Vera don't enter into the loan with Mr Mitrevski"? A. Definitely not. I did trust Mr Hastie because we knew him before, long before. Q. So if you had told somebody like Mr Hastie what Mr Mitrevski had said to you, and Mr Hastie advised you against it, would you have entered into the loan? A. No. Q. And because you trusted Mr Hastie? A. Yes, we did, because he was our finance consultant. He have helped us before. Q. And why didn't you ring up Mr Hastie and just say to him "Mr Mitrevski has made us this deal, what do you think about it?"? A. Like I said to you we thought we know the man. We trusted him, and you think 'why will I ring Mr Hastie when you know I know the man and he is telling me the right thing?" (T 91:10-28)

Mrs Bakovski was then taken (i) to the mortgage signed by the plaintiffs and witnessed by Mr Arkoudis (Exhibit 1 at p 45); (ii) Annexure "A" to the mortgage (Exhibit 1 at p 46); (iii) Letter of Offer dated 13 August 2004 signed by the plaintiffs, also signed and witnessed.

Mrs Bakovski stated in relation to these documents that even if they signed them: "I don't recall this, but even if we did, I think we still would have thought we were doing something for Mr Mitrevski but not for us." (T 97:22-23)

When it was put in cross-examination that all the documents signed by her were read out to her by Mr Arkoudis, she disagreed: T 99:25-30. She was firm in saying he did not explain the documents to her: T 99:45-50. She denied that the contents of the documents were read to her and her husband. She denied, in particular, that Mr Arkoudis said that the interest rate of sixty percent was ridiculous and asked why they were borrowing at such a high rate. She denied that he recommended not going into the loan, denied that her husband told Mr Arkoudis he needed the money "now" otherwise he was going to lose a business opportunity or that he said he would be refinancing in two months time or that he said that they had to realise it was not a good deal: T 100-101. She denied statements as set out by Mr Arkoudis in his affidavit.

Mrs Bakovski said she and her husband did not sign the direction to pay Demar Investments at Bransgroves' offices. They signed the documents at Mr Arkoudis' office: T 101:30-45.

In respect of Crown & Gleeson's Letter of Offer dated 24 August 2004, it was put to Mrs Bakovski that this was an offer of total loan of $750,000 which after deductions was a net loan of $652,045 addressed to her and her husband, a copy of which was at Exhibit 1 at p 64.

She said this loan was organised by Mr Mitrevski: T 105. She said she believed the money was being lent to Mr Mitrevski: T 105:30-40. She said she had no interest in how much he was borrowing.

The direction to pay signed by the plaintiffs for the money to be paid to Demar Investments referred to "our money": Exhibit 1 at p 75. It was put that this reflected the words the plaintiffs had used. Mrs Bakovski said that those words did not reflect her understanding and were incorrect: T 107:1. "Well, I didn't think of it at all. I just write what they said to me but it's incorrect. Now that I'm seeing it it's incorrect." (T 107:11-12)

She later said she was 100% sure that the money was going to Mr Mitrevski: T 107:40-50. She rejected the proposition that she knew they were borrowing money from Crown & Gleeson: T 108:10-16.

It was put to her that on the same day as signing the cheque direction to Crown & Gleeson she and her husband saw Mr Sharpe (that is, on 30 August 2004). She said she saw Mr Sharpe by herself. It was put to her that she said to Mr Sharpe: "We've borrowed money for a friend of ours, Robert Mitrevski". She agreed that was possible: T 108:50-T 109:1.

She agreed that she saw Mr Sharpe with a view to having a document drawn up for Mr Mitrevski to sign acknowledging the money he owed them: T 109:20-25.

It was put to Mrs Bakovski that when she went to see Mr Sharpe she knew she and her husband had borrowed money from both Accom and Crown & Gleeson. She said she did not: T 111:5-10. She agreed that she went to Mr Sharpe to have the document drafted confirming that Mr Mitrevski owed her/them money (T 111:15-22), but rejected the suggestion that she knew they had borrowed monies from the finance company: T 111:25-30.

On 18 October 2004, Mr Hastie wrote to Mr Sharpe (Exhibit 1 at p 83) in which he passed on information he had obtained from the plaintiffs. Mrs Bakovski was cross-examined on Mr Hastie's reference recorded in the letter: "... he [Mr Mitrevski] approached the Bakovski [sic] to borrow monies from them on their properties to complete his own developments near Bateman's Bay ..."

In cross-examination it was put to Mrs Bakovski that Mr Mitrevski had asked to come and borrow money from her. She agreed, but then when it was put to her he had asked for the plaintiffs to borrow the money to which she replied: "He organised for him to borrow the money, not for us." T 112:29-39.

It was put to her that she told Mr Hastie that Mr Mitrevski had asked to borrow money from her. She rejected that proposition: T 112:45-50.

Mrs Bakovski was then taken to her conference with Mr Sharpe on 5 November 2004 and she was taken to Mr Sharpe's file note dated 8 November 2004 (Exhibit 1 at p 87 at 88) and asked: "Q. You see, what Mr Sharpe is saying in this note is that you told him you signed the Crown & Gleeson and Accom Finance mortgages; that's what you told Mr Sharpe? A. Thinking that they were from Mitrevski mortgages, not for us. Q. And you told Mr Sharpe that you took out the first two loans? A. Again, thinking that they were loans on Mitrevski's, not for us. Q. But you told Mr Sharpe that you and your husband had taken out the loans -- A. No. Q. -- Not Mr Mitrevski? A. Not true." (T 116:9-22)

As earlier noted, on 6 October 2004 the plaintiffs were served with a Statement of Claim issued by Accom seeking, inter alia, an order for possession. It was these proceedings that led the plaintiffs to seek advice from Mr Sharpe.

It was put to Mrs Bakovski that the Statement of Claim alleged that the plaintiffs were the borrowers: "Q. But you clearly saw in paragraph 2 that in this document Accom was saying it lent the money to you? A. It doesn't matter what I saw. In my mind I was still seeing Mitrevski borrowing money, not us. Q. Yes, but you saw in the document with the Supreme Court's name on it that Accom Finance was saying it had lent the money to you? A. Again, we did not borrow money and I didn't thought of it at all. Q. You didn't think about it at all because the truth is that you knew when you received this document that you and your husband had borrowed the money from Accom Finance? A. That's not true." (T 120:30-42)

She was asked about her attendance on Mr Hastie in October 2004 and was taken to the letter dated 18 October 2004 written by Mr Hastie to Mr Sharpe: Exhibit 1 at pp 83-85. Reference was made to Mr Hastie's statement that Mr Mitrevski had come to them "to borrow monies from them" (Exhibit 1 at p 83). She said she did not say those words to Mr Hastie: T 112:45-50.

Mrs Bakovski was then taken to Mr Sharpe's file note.

Mrs Bakovski was cross-examined on two further episodes when the Accom loan was discussed. The first was at Kogarah Police Station on 12 November 2004 where a conversation took place with Sergeant Robert Bilek who created a record, a copy of which is in Exhibit 1 at pp 90-91.

The second was a statement prepared for the plaintiffs by Mr Hastie: Exhibit 1 at pp 92-99.

As to the first, Mrs Bakovski was asked about the reference in the police record that the plaintiffs "began discussing with [Mitrevski] the development of [the plaintiffs'] property in Belmont". In response Mrs Bakovski stated "That's not true, I'm sorry": T 127:35-40, and said she did not tell police that. It was put that she told Sergeant Bilek that she and her husband borrowed $386,240 from Accom and gave it to Mr Mitrevski. She responded: "Not in that context": T 127:47-50.

As to the second, the statement prepared by Mr Hastie, it was put to Mrs Bakovski that she told Mr Hastie that Mr Mitrevski had indicated or promised that they, (he and the plaintiffs), would develop Belmont together. Mrs Bakovski firmly rejected that there was any such project. This question was based upon a dot point in the statement: "even indicated/promised that we all would develop Belmont together and come up with a drawn plan."

Mrs Bakovski was cross-examined on a letter prepared by Mr Hastie addressed to Liberty Financial which the plaintiffs signed. In it reference was made to Mr Mitrevski, namely, that he "... would pay back the loan that he borrowed from us by October 2004 ...": Exhibit 1 at p 100. Mrs Bakovski said they did not tell Mr Hastie that, and that "we always told him that he was supposed to get money, not us...": T 131:35-40.

Mrs Bakovski accepted that she did not make a complaint about Mr Arkoudis or tell Mr Sharpe that Mr Arkoudis had not explained the documents she had signed: T 133-134. She rejected that she had told Mr Hastie that she and her husband had borrowed money and said that it was Mr Hastie who told them (the plaintiffs) of that fact.

Expert evidence was given by Mr Neville James Moses, solicitor. Mr Moses swore an affidavit in the proceedings on 11 May 2012. Annexed to his affidavit, and marked "A", is his statement in which he addresses his evidence to the matters arising in the present proceedings.

Mr Moses stated that a solicitor retained to advise on the terms of mortgage loan documents is not obliged to go beyond the retainer and, for example, give financial advice to the prospective borrower/mortgagor. Nevertheless, he stated, it is standard practice for a solicitor in such circumstances to give to the client the benefit of any advice which, although not directly related to the explanation of the documents, is within the solicitor's competency to give. For example, Mr Moses stated that if the loan document contains an unusual or onerous conditions, it is standard practice for the solicitor to advise that this is so and that the client should endeavour to renegotiate these provisions.

Mr Moses further stated that a similar situation arises if the solicitor feels that the actions proposed to be taken by the client are not in his or her best interests and arise from the client's ignorance of matters which the solicitor can see are relevant to the client's decision to enter into the transaction. In such a case, he stated, it is standard practice for the solicitor to advise the client of those relevant matters and, if appropriate, to also advise the client to obtain independent financial advise in regard to them: at [14].

Mr Moses stated that such matters go to the client's ultimate understanding of the transaction and it would, in his view, be standard practice for a solicitor to bring such matters to the client's attention so that in proceeding with the transaction the client can be seen to be making an informed decision. As Mr Moses observed, a solicitor is impliedly agreeing to act at all times in the legitimate interests of his or her client: at [15].

In the present proceedings, Mr Arkoudis did not make any record of the advice which he says was given by him to the plaintiffs. Mr Moses observed that he found this unusual in a situation where the solicitor deposes to having effectively endeavoured to dissuade the plaintiffs from proceeding without obtaining financial advice or instructing him to take a number of precautions which may have ameliorated the terms of the arrangement: at [44].

Mr Moses in this respect stated that in his experience, as a matter of standard practice, when clients are given advice which they are not prepared to take, such facts are recorded at least by way of a detailed file note and often by way of having the clients sign a record of that advice: at [45]. Whilst, as in the present case, documents were signed by the plaintiffs acknowledging that the solicitor had explained the documentation, the obligations of the borrowers and the consequences of default, such documents made no reference to the giving of additional advice, including the need for the plaintiffs to obtain financial advice which Mr Arkoudis deposed to having given to the plaintiffs: at [46].

Mr Arkoudis was admitted to practice as a solicitor on 16 December 1992. From about February 1993 to the end of 1995 he was employed as a solicitor with Lenehan & Co. At that time he said that 70% of the work undertaken by him involved conveyancing and mortgages. He said, to the best of his recollection, a slight majority of the 70% involved acting for purchasers, and the majority of those involved loans and mortgages.

When he commenced work at Lenehan & Co he said he was closely supervised by Mr Lenehan.

After a period of time he would advise clients in conference by himself although Mr Lenehan would occasionally sit in whilst he did so.

He described his practice when acting for purchasers. This, in part, was based on his experience of observing Mr Lenehan advising purchasers about loan and mortgage documents.

He said that Mr Lenehan taught him the importance of explaining loan and mortgage documents in the manner that would be easily understood by clients. He said that he had been instructed by Mr Lenehan that he should always explain worst-case scenarios under loan and mortgage documents to ensure clients were aware of the possible consequences if they defaulted in their obligations.

Mr Arkoudis said that he was also taught to always assess clients' understanding of his advice by engaging them in conversation and watching their reactions to advice, and asking them from time to time whether they understood the advice given. He said that if he had any doubt about the understanding he would advise them again in different terms and then assess their understanding.

Mr Arkoudis explained the practice he developed in examining loan and mortgage documents to understand them and his practice in explaining the commercial terms of loans and mortgages.

In paragraph [21] of his affidavit he set out the general advice he said he gave to clients who were borrowing money and signing mortgage documentation.

Mr Arkoudis' clients varied from what he referred to as "mums and dads", to commercially sophisticated businessmen.

He said that it was only when satisfied that the borrower understood that he would then arrange for the document to be signed, initialled and/or declared and then moved on to the next document.

From the end of 1995 until the end of 1997 he was employed as a solicitor with Heidtman & Co. He said he worked under property and mortgage lawyers at that firm and in doing so he acted on loan and mortgage transactions for various lenders.

Mr Arkoudis said he also acted for lenders in default proceedings against borrowers.

From the end of 1997 until 1998 he was employed as a solicitor with the firm (then) Freehills as a locum. His employment related to private property and mortgage transaction work for individual partners of the firm and executives of client companies.

From 1998 until about 2000 he was employed as a solicitor with GIO Finance. He acted for that company as the lender in domestic and commercial loans.

For a short time he worked with Stockland Trust Group as general counsel and also acted as consultant to Heidtman & Co.

He returned to Lenehan & Co for a second time in about 2001. He said the predominant part of his practice was property and mortgage transaction work.

In his affidavit sworn on 16 March 2012, Mr Arkoudis stated: "33. I took unpaid leave from Lenehan & Co in 2008 for approximately two years during which I carried out a fitness regime as a break from professional work. I fulfilled CLE requirements and did occasional matters for the firm when they arose. 34. I took up a role as company secretary and director of Chameleon Mining NL in 2010. On 1 March 2012 he became a consultant to Chameleon Mining NL."

Mr Arkoudis said that although it was difficult to estimate accurately, his best estimate was that between the time of first commencing work with Lenehan & Co in 1993 and August 2004, he acted for borrowers/mortgagors on somewhere around 500 transactions.

Mr Arkoudis said that he first came across Bransgroves Lawyers professionally in about 2003 when that firm acted for lenders and he acted for borrowers.

He said that he recalled that loans in respect of which Bransgroves acted for the lenders were usually short term (up to a year) and that the terms of the loan and mortgage documents prepared by Bransgroves were onerous for the borrowers: at [39].

In paragraph [40] of his affidavit he stated: "I had also heard from various lenders that Bransgroves Lawyers had an aggressive reputation in the sense that action would be taken by that firm on behalf of lenders almost as soon as a borrower defaulted."

He said that by reason of the terms that he had read in Bransgroves' loans and mortgages, and their reputation as had been conveyed to him of acting on behalf of lenders immediately if a breach of loan transaction occurred, he was conscious of exercising extra care when advising client borrowers on loan and mortgage documentation that came from that firm.

Mr Arkoudis said that not long before August 2004 Ms Thanudchang (who he believed was employed by a company, Mercantile Lending) contacted him advising him that she had left that entity and started her own mortgage and finance broking business called "ProPex".

Mr Arkoudis stated in his affidavit: "On or about 13 August 2004 I received a telephone call from Ms Thanudchang. We had the following conversation: Ms Thanudchang: 'I need you to help me out. I need you to advise some people on mortgage documents. They need an independent solicitor. The documents need to be signed today.' Me: 'I wish you would give me more notice. Ok get them to come in.'" (at [43])

Mr Arkoudis said that he recalled the conversation because there were some "unusual" features. He said he had not received work from Ms Thanudchang for some time. The advice to be given to the persons Ms Thanudchang referred to was required urgently. He said that the fact that the documents came from Bransgroves, and that the terms were onerous for the borrowers, were the "unusual" features.

He said that shortly after the telephone call with Ms Thanudchang he received an email from Bransgroves Lawyers (at 11:48am by email). The email attached a package of documents for a Mr Bakovski and Mrs Bakovski. He itemised the various documents in paragraph [45] of his affidavit. They included a Memorandum of Mortgage, Caveat and a Letter of Offer and an Acknowledgment of Legal Advice by Borrower.

Mr Arkoudis then said that he forwarded the email with attachments to his secretary Ms Sandrussi to have them printed in readiness for the conference. In this respect he referred to an email that he sent to his secretary at 11:54am.

Mr Arkoudis said that approximately 20 minutes after receiving the email from Bransgroves he observed a man and a woman in the reception area of Lenehan & Co offices.

He said they introduced themselves to him by name. He then said they exchanged pleasantries and he directed them into his office. He said that he formed the view that both Mr and Mrs Bakovski spoke English well, although with an accent.

Mr Arkoudis said that he recalled the conference with the plaintiffs because of the unusual features referred to above. He said he recalled parts of the conversation during the conference, but he could not recall every part of it. He set out below "specific parts" that he said he was able to recall relevant to the proceedings.

He said the documents were in a bundle in front of him on the conference table and the plaintiffs sat opposite him.

Mr Arkoudis said that he read through the documents to himself. He said he then discussed them as set out in his affidavit. He said he recalled discussing the particular documents specified in paragraph [51] of his affidavit. These included the mortgage and Memorandum of Mortgage.

Although Mr Arkoudis failed to make any file note or memorandum or create any correspondence in relation to the conference with the plaintiffs, he set out in his affidavit what he said was said as follows: 52 "Me: "I'm acting as a solicitor for both of you on this loan. Because you are husband and wife I have to explain to you that unless you consent I cannot advise both of you. This is because you may have different interests in the transaction now or if not now you may have in the future. Because of this possibility I recommend that you obtain separate advice independent of each other. If you do not want to obtain separate independent advice you have to sign this form [pointing to the forms]. By signing this form you are saying that you consent or are happy with me advising both of you together at the same time. Mr Bakovski: Yes we are happy for you to advise us together. We do not want to see separate solicitors. Me: Mrs Bakovski are you happy with this? Mrs Bakovski: Yes I am." 53 The conversation continued: Me: "I must also ask you Mrs Bakovski whether you are here of your own free will. There are cases where the wife is forced by her husband to sign loan and mortgage documentation. I want to make sure that no one is forcing you to be here. Mrs Bakovski: No not at all. I am here because I want to sign the documents. No one is forcing me to do it. Me: Ok. If you consent to me advising both of you together then you need to sign these forms." 54 I then observed Mr Bakovski and Mrs Bakovski each sign a separate Consent of Borrower to Legal Advice form ... 55 I showed them the Letter of Offer ... and said: Me: "You need to initial at the end of each box of the terms as borrowers to show that you understand the terms." 56 I handed them the Letter of Offer ... and paraphrased the contents of each box numbered 1 to 15 after which they initialled each box. 57 We then had the following conversation: Me: "Why are you borrowing the money? Mr Bakovski: I am going to invest in a development. Me: I don't think you should enter into this loan. The interest rate of 60% is ridiculous. Why do you need to borrow at such a high rate? I recommend that you do not do it. Mr Bakovski: I need the money now otherwise I am going to lose a business opportunity. I will be refinancing it after two months anyway." 58 We continued: Me: I know the solicitor acting for the lender is very strict on default. If you do anything wrong or don't comply with the loan they will sue you immediately. If you sign these documents you are in effect signing up to losing you house if you don't make the repayments. Mr Bakovski: I have been doing this for a long time. We have a lot of other properties. We know what we are doing. We need to do the deal now. If we don't do it. We will lose this business opportunity. Me: I am sorry but I won't be doing my job if I do not provide you advice. Mr Bakovski: Yes I know. I have done this before." 59 I recall then giving my general advice ... 60 I then turned to the Mortgage ... and we had the following exchange: Me: "This is the Mortgage. This document is lodged with the Land Titles Office. It registers the hold the lender has over your property. The effect of this document is that it gives the lender the right to take action to take you r house if you do not repay the loan and do something wrong under the loan contract. If you wish to proceed you need to sign it. Mr Bakovski: I understand that." 61 We continued: Me: "The Annexure to the Mortgage contains the amount of the loan, which is (I then read the loan amount). The term of the loan is (I then read the term of the loan). The interest rate is (I then read the 'default' interest rate amount) per annum. This is a ridiculously high rate. It is very dangerous. This is much higher than what the Consumer Credit Code or the law allows for a home loan. If you still want to proceed you will have to sign a document that says the Consumer Credit Code does not apply because this is a business loan. If you make your payments on time the interest reduces to (I then read the 'non-default' interest rate) per annum. Also you have to pay careful attention to the damages for early and late payment. You will be slugged (I then read the amounts specified for early and late repayment provided in Annexure A to the Mortgage ...) if you pay the loan late or early. This is ridiculous. I have to recommend against you entering this loan. What do you want to do? Do you still want to go ahead? Mr Bakovski: Yes, I do." 62 I recall turning to the Mortgage Memorandum ... and we had the following exchange: Me: "Attached to the Mortgage is a Memorandum. This document incorporates all of the loan provisions and the terms of the mortgage. It makes you responsible for the money that you are borrowing and ties you into the conditions of the loan. This is a very harsh loan. I have already told you there are damages for early and late repayment. But it gets much worse. You are also responsible to indemnify the lender for essentially any expense it may incur as a consequence of lending you this money. You need to understand that if you have litigation with the lender and you lose, all of the costs that the lender will incur will be paid by you. So the amount you need to repay under this loan might be much higher than the loan amount of (I repeated the loan amount). Mr Bakovski: I see." 63 We continued: Me: "If you don't repay the loan the house can be sold by the lender and if there is not enough money from the sale to cover the loan and all other expenses due, the lender can chase either or both of you for any balance of money still owing. A lot of people think that when they give security over the property, the lender can only chase them up to the value of the property secured. This is not the case. If there is still money due after the sale then the lender can chase you for your other personal assets. This is important because you are at risk of not only losing your secured house buy your other assets as well. Everything you own is potentially at risk. Do you understand this? Mr Bakovski: Yes." 64 I recall advising on the default clauses in the Memorandum ... as follows: Me: "Another important thing to remember is that default in these documents doesn't just mean not making repayments. Default can take other forms. For example say you experience financial difficulties and can't make a payment on a loan from anyone else, you will be automatically in default of this loan in front of you and this lender can immediately sue you to take your house. I know these solicitors Bransgroves and they will not hesitate to take your house if they think you have done something wrong on the contract. So you have to be very careful of this. In some ways this type of default is more dangerous than a monetary default because the lender does not have to issue a notice or warning before they take court action to take you house. Do you understand? Mr Bakovski: I understand." 65 I recall discussing the Guarantee Provisions section of the Mortgage Memorandum .... I said: Me: "You do not really need to concern yourself with these sections because you are borrowers and mortgagors." 66 I recall suggesting that the loan terms be negotiated. Mr and Mrs Bakovski used a tone of voice that sounded a little angry and exasperated. We had the following conversation: Me: "You have to realise that this is not a good deal. If you like I could write to the solicitor and ask for a number of changes to these documents that make it easier for you just to be on the safe side. Maybe we can negotiate better terms? Mr Bakovski: No. We have to hurry up. We don't want to get into legal hames and waste more time. Mrs Bakovski: We don't want you to do anything. We just need you to witness the documents." 67 We continued: Me: "So you only want me to give you the advice and witness the documents. You don't want me to settle the loan? Mr Bakovski: Yes, that's right. We don't want you to do anything else." 68 I recall turning to the Interest Rate Analysis form ... and said: Me: "Here it is in a nutshell. Have a look at these figures. If I were you I would never agree to this loan. You need to pay monthly interest of [I read the figure from the documents]. That is [I approximated the weekly amount] per week. The solicitor for the lender is telling you here that if you are just [I read out the number of days in the document] days late with payment you will pay on top of everything else, another [I read the figure from the document]. Look what it says here [I then proceeded to quote the document under the heading 'Don't let this happen to you']. The only way you can guarantee not incurring this is if you not go through with this loan." 69 I then turned to the Acknowledgment of Legal Advice by Borrower .... I read this out in its entirety. We then had the following conversation: Me: "It is important for you to understand that I cannot give you financial advice but only legal advice. You need to see your accountant to get financial advice. At the end of the day I don't know anything about your financial position and only you and your accountant can know that. He is the best person to speak to you about whether or not you can afford the loan and afford losing your house and other assets. Do you understand? Mr/Mrs Bakovski: Yes. Me: I need to see identification so that you can prove to me that you are who you say you are and are the actual borrowers on this loan."

Mr Arkoudis continued in his affidavit to say that he advised on other terms of the mortgage, explaining the documents using layman's language. He said that after explaining each document he had the plaintiffs sign them.

In paragraph [79] of his affidavit, Mr Arkoudis said that he did not make an appointment note with the plaintiffs in a physical or electronic diary because the conference was arranged at short notice. He said that his recollection was that the conference took approximately one hour.

He also said that during the conference he made a few notes which were mostly calculations. He said he made the calculations when checking the figures in the documents (for example, monthly payments). He also said he wrote down a number of clause numbers, being clauses that he identified as ones that should be negotiated with Bransgroves. He said that the plaintiffs told him that they did not want him to negotiate anything with Bransgroves: at [80].

Mr Arkoudis stated: "81. I did not otherwise keep any file note of the advice I had given them. Perhaps I should have but the Bakovskis had signed a number of documents which acknowledged they had received legal advice from me including: a. (Directly) the Declaration by Borrower, paragraph 2 of [37] and Acknowledgment of Legal Advice by Borrower - [38]; and b. (Inferentially) the Consent of Borrowers to Legal Advice ... the Letter of Offer and the Loan Repayment Ability Declaration ..."

On 17 August 2004, Mr Arkoudis said he received a facsimile from Bransgroves requesting certification of the plaintiffs' "identification". He said that as he had sighted the original identification documents during the conference he certified a further copy and sent it to Bransgroves.

On 16 September 2004, he said he received a letter dated 15 September 2004 from RL Kremnizer & Co.

On 23 September 2004, Mr Arkoudis said he received a facsimile dated the same day from RL Kremnizer & Co and again received further documents from that firm on 6 October 2004, 15 October 2004 and 26 October 2004.

On 12 February 2010, Mrs Bakovski signed a complaint form with the Office of the Legal Services Commissioner: Plaintiffs' Tender Bundle, Exhibit A at pp 1277-1280.

On 12 February 2010, the plaintiffs sent a 15 page letter to the Office of the Legal Services Commissioner making a complaint in respect of Mr Arkoudis: Exhibit A at pp 1281-1294A.

On 20 April 2010, the Mediation & Investigation Officer of the Commissioner wrote to Mr Arkoudis: Exhibit A at p 1333.

On 18 May 2010, a letter was written by Mr Lenehan to the Office of the Legal Services Commissioner in response to the letter from the Commissioner dated 9 March 2010 and subsequent correspondence. The letter was in the following terms: "RE: Complaint by George and Vera Bakovski We refer to your letter of 9 March last and subsequent correspondence and respond below to your questions of 9 March last. 1. We acted for the complainants as follows: (a) On 13 August 2004 advice was given by James Arkoudis of this office in respect of an advance from Accom Finance Pty Ltd for an amount of $386,250.00 for a term of 2 months at an interest rate of 60% per annum. It was bridging finance, and the borrowers were advised that they should not sign the documents, but should wait for long term finance at a reasonable rate, which was expected to come through within 2 months, from a client of Kremniser. The documents for the short term loan were submitted to the Borrowers by Bransgrove. At the request of the borrowers, the documents were witnessed and returned to them or their broker. (b) Subsequently about 15 September 2004, we received documents from Kremniser, which were completed at the request of Mr and Mrs Bakovski, and witnessed by James Arkoudis. These were sent to the broker for finalisation, but we were subsequently notified that the advance was withdrawn, by letter from Kremnizer of 22 October 2004. The broker had already notified us that the matter was not proceeding. 2. Our retainer ceased when we were notified that the loan through Kremnizer was not to proceed. 3. We did not act for Mitrevski in relation to these people who were referred, to us, by Propex Finance Brokers, for advice on mortgage documents. 4. Our advice was independent legal advice. The Borrowers were each informed that a conflict could arise, because both of them were being advised, and each signed a consent to James advising their co borrower, notwithstanding the possible conflict. 5. They were advised of their situation, as borrowers and were advised that they should not take on the liability of such a high interest rate, or put themselves at risk on such a short term mortgage. 6. Yes, see 5 above. 7. Not so. The only possible conflict was between them as co-borrowers. We did not act for any other party. 8. Not known. Our involvement was to complete documents, and return them to the broker. 9. Not known to us. 10. We were informed that it was interim finance, pending a loan through Kremnizer. We advised that they should wait for the loan through Kremnizer, and that the interim finance should be dispensed with, as too expensive, and too dangerous. We trust the above satisfies your enquiry." (Plaintiffs' Tender Bundle, vol 6, at pp 1335-6)

Mr Arkoudis confirmed that he was involved in the preparation of the letter: T 158:25-30. As discussed below, it contained a number of errors.

On 11 August 2010, a further letter was written on behalf of the Commissioner to Lenehan & Co. It referred to previous correspondence and that a copy of his response to the complaint had been sent to the plaintiffs and the Commissioner forwarded a copy of further submissions from the plaintiffs received on 16 July 2010. In the letter from the Commissioner it was stated: "First, in view of his personal involvement in the matter, there should be direct input from Mr Arkoudis concerning the issue raised by this complaint."

A little later in the letter it was stated: "Could you please provide a copy of any correspondence or file notes obtaining the above advice, given that the complainants denied ever receiving it from Mr Arkoudis."

On 16 August 2010, a letter was written by Mr Lenehan to the Office of the Legal Services Commissioner. It was in the following terms: "RE: Complaint by George and Vera Bakovski We have your letter of 11 August last. Bakovski's solicitors now have our legal file on this matter. We attach a memorandum by way of direct input from James Arkoudis. As to your numbered questions: 1,2. No. 3. Not understood. 4. See our letter of 18 May 2010. 5. No." (Plaintiffs' Tender Bundle, vol 6, at p 1357)

Mr Arkoudis said in evidence that he had input into the letter of 11 August 2010: T 159:40-45.

A memorandum dated 16 August 2010 and signed by Mr Arkoudis was sent to the Legal Services Commissioner in answer to the abovementioned letter dated 11 August 2010 from Mr Jim Marsh, Mediation & Investigation Officer of the Office of the Legal Services Commissioner. That letter stated that, in view of Mr Arkoudis' personal involvement in the matter, there should be direct input from Mr Arkoudis concerning the issues raised by the complaint.

The letter further observed that apart from additional questions numbered 1 to 5, set out at pages 1-2 of the letter, Mr Arkoudis was "... invited to comment further as you see fit". The letter accordingly invited Mr Arkoudis to include any matter he considered relevant to the subject of complaint.

Accordingly, a memorandum was sent to the Legal Services Commissioner with the above letter of the same date: Exhibit A at p 1358.

The memorandum was expressed as having been written by Mr Arkoudis and signed by him. It was in the following terms: "RE: Complaint by George and Vera Bakovski I have read your letter of 11 August last and have provided input to Lenehan & Co ("the firm") for the reply. I have seen the reply and confirm that it is correct. In relation to the reply of 18 May 2010, sent to you by the firm, I supplied the information to Mr Lenehan and approved the reply to the Legal Services Commission. I kept no file notes, on this matter, but my advice followed the rule 45 format. In relation to entering into the loan, I said words to the effect: "I am a solicitor, and can give only legal advice. Personally, I do not think you should sign this mortgage because of the interest rate, and short term. You should wait for the end finance. You should obtain financial advice from an accountant or financial adviser."'

In cross-examination Mr Arkoudis agreed that the correspondence from the Commissioner had raised a serious matter of professional responsibility concerning the matter. He also acknowledged that he was under a professional and legal obligation to respond to any questions put on behalf of the Legal Services Commissioner: "Q. So in giving an answer to any question coming from the Legal Services Commission about a complaint you understood you were under a professional and legal obligation to get it right? A. That is correct. But at the time I had not viewed the file. I was unable to do so. Q. And why were you unable to view the file? A. Because I was gravely ill." (T 161:20-40)

In Mr Finnane's oral submissions two matters in particular were noted about the memorandum of 16 August 2010: (i) Mr Arkoudis made no attempt in it to correct the now accepted errors contained in his letter to the Legal Services Commissioner dated 18 March 2010. (ii) The quoted statements set out in paragraph [310] asserted to have been made by Mr Arkoudis to the plaintiffs were not included in Mr Arkoudis' affidavit in the present proceedings.

In addition to those two matters, it was observed that certain matters raised in Mr Arkoudis' affidavit in the present proceedings were not referred to in the communications to the Legal Services Commissioner.

Reference was also made to an error in Mr Arkoudis' verified defence. In the original verified defence dated 28 March 2011 it was observed that Mr Arkoudis stated, wrongly, that the plaintiff brought the "Accom loan documents" with them to the meeting on 13 August 2004. The evidence demonstrated that this verified ground of defence by Mr Arkoudis was incorrect. It was relied upon as a further matter going to the reliability of Mr Arkoudis.

Mr Arkoudis was criticised for seeking to advance, as an explanation, that he was quite ill at the time of writing the memorandum of 16 August 2010. His first affidavit in the present proceedings had made no mention of any ill health affecting or interfering with his capacity to respond to the Legal Services Commissioner.

It was submitted that his explanation in cross-examination should be rejected: Plaintiffs' Written Submissions at [65].

In this latter respect a number of specific matters were relied upon. They included the fact that the account of his illness in cross-examination was inconsistent with paragraph [33] of his affidavit.

Additionally, in the period of illness to which he referred there was evidence that he had been appointed company secretary of three companies (which included two public companies) and that he accordingly held responsible positions and was required to discharge activities required by those appointments. These included ASX compliance questions that were directed to Chameleon Mining NL (letter dated 23 September 2010 signed by Mr Arkoudis): at [69].

In circumstances in which, it was submitted, there had been no suggestion that Mr and Mrs Bakovski had contaminated each other's evidence, it was submitted that the evidence of each corroborated the other: Plaintiffs' Written Submissions at [11].

Mr Arkoudis, on the other hand, it was noted, did not have any corroboration to support his account of what was said between him and the plaintiffs on 13 August 2004. Although his case was that he gave the plaintiffs strong advice against the plaintiffs entering into the loan/mortgage with Accom, he failed to create a file note or indeed any record referring or recording advice he says he gave in accordance with the accepted and customary practice of solicitors. Further, it was submitted that the executed loan documents themselves, relied upon by the defendants, do not provide corroboration as they are consistent with both Mr Arkoudis' account and that of the plaintiffs: at [12].

The executed documents, it was observed, do not say anything on the critical matters such as Mr Arkoudis' alleged advice not to enter into the loan, Mr Bakovski's alleged insistence that he wanted to proceed, Mr Bakovski's alleged explanation of what the finance was for, the alleged advice by Mr Arkoudis that the terms of the proposed loan should be negotiated and Mr Bakovski's alleged refusal to follow that advice.

In the plaintiffs' submissions it was observed that there were a number of unusual features concerning the loan transaction. These include the following matters:

Mr Arkoudis acknowledged in cross-examination that the proposed loan could appropriately be described as an "extreme" one. That fact in itself, it was submitted, called out for the need to make a file note: at [15].

It was contended for the plaintiffs that there was no "true" explanation given by Mr Arkoudis as to why he had not or would not have made a file note of the conference. The reference by him to the fact that a file had not been opened, it was submitted, provides no explanation at all. It was submitted that it would be most unlikely in any event that Mr Arkoudis would remember so many years later such a mundane detail (of a file not having been opened): at [16].

Mr Arkoudis next sought to provide as an explanation that he had kept a "running sheet" but that this did not make it to the file. The submission on behalf of the plaintiffs, in essence, was that whatever was said by Mr Arkoudis about a running sheet having been created, the fact remains that it was not suggested that any such document (or any other), contained a record of the advice allegedly given by Mr Arkoudis to Mr and Mrs Bakovski.

The absence of a record of advice of any kind as claimed by Mr Arkoudis was in itself said to have evidentiary significance. If strong advice had been given in such unusual circumstances as Mr Arkoudis said was apparent, the expectation would be, as Mr Moses observed, that an accurate account of what was stated (in particular, advice and warnings given) would be created.

The fact that no record was made by Mr Arkoudis, it was contended, is inconsistent with the conference having proceeded in the way that Mr Arkoudis said. If factually correct, not only would a file note have been prepared, but it would have been carefully retained.

There is, in the submissions for the plaintiffs, said to be a fundamental problem with the statements which Mr Arkoudis attributes to Mr Bakovski in the conference. The alleged statements, it was observed, bear no relationship to the real facts and it is accordingly implausible to suggest that Mr Bakovski would have said anything along the lines alleged.

In respect of the statement attributed to Mr Bakovski "I am going to invest in a development", it was noted that this needed to be considered in light of the overwhelming evidence that points against the likelihood of such a statement having been made. This includes the fact that the plaintiffs, as at 13 August 2004, had never been involved in any development and they had not discussed or proposed or made any decision to invest in any development. There is, it was argued, no reason why Mr Bakovski would make such a statement and no reason to lie to Mr Arkoudis by making a statement along those lines.

It was observed that although over the years of their working life the plaintiffs bought some residential properties, they had not only never undertaken any property development, they had no experience or skill in relation to property development, and there was no evidence that at that stage in their lives (that is, 2004) they had plans to do so. It was accordingly submitted by Mr Finnane that it is implausible that Mr Bakovski would have made the statement attributed to him in [329] by Mr Arkoudis.

Given that the plaintiffs had never been involved in any property development, and were not, as at 13 August 2004, parties to any proposed development, the submission was that these facts make the account attributed to them by Mr Arkoudis inherently unlikely.

Mr Finnane further observed that the underlying fact concerning the reason for the loan was that, as the plaintiffs explained in their affidavits, they had agreed to provide financial assistance to Mr Mitrevski who was then to use the funds for his own purposes associated with Malua Bay. Their long-term intention was not to develop their property at Belmont but to sell it to Mr Mitrevski.

Accordingly, in addition to the fact that the plaintiffs had no intention to invest in a development, there was no reason to falsely tell Mr Arkoudis that that is what they were proposing to do: at [24].

A further statement that Mr Arkoudis attributed to Mr Bakovski "I have been doing this for a long time" and "we know what we are doing", and "I have done this before" are all statements that would have been false as at 13 August 2004. They had not in fact been doing any such financing, or investing in or had any participation in development projects.

It was submitted that there was no reason for Mr Bakovski to make false statements such as these and for Mrs Bakovski to simply stand by whilst he did so: at [27].

This alleged statement and the statement referred to in [329], it may be noted, were first documented in Mr Arkoudis' affidavit of 16 March 2012. Such statements had not been referred to in either his letter to the Legal Services Commissioner dated 18 May 2010, or in his letter or memorandum dated 16 August 2010.

Similarly, the statement attributed to Mr Bakovski by Mr Arkoudis that they would be refinancing the loan after two months again was said to lack credibility and is implausible in circumstances in which there was no evidence in the proceedings to suggest that there was any reason why Mr Bakovski had an interest in borrowing money at a high rate for only two months with a view to refinancing it on a more reasonable basis two months latter: T 264.

Additionally, it was submitted, there was nothing in the evidence that would explain Mr Bakovski being motivated to do that: "... There is actually also no evidence showing that at the time of this conference there was in fact any other finance or any application or process to obtain this further finance ..." (T 265:1-5)

A further statement attributed to Mr Bakovski "I will be refinancing it after two months anyway" is denied by the plaintiffs. It was again contended there were no circumstances then existing which would provide a reason for Mr Bakovski to borrow money at extremely high rates of interest from a lender with a view to then, two months later, refinancing the loan. Contrary to Mr Arkoudis' evidence, no application for refinancing in two months time in fact existed as at the time of the meeting on 13 August 2004: at [29].

It was submitted for the plaintiffs that it was relevant to have regard to the type of work that Mr Arkoudis regularly did. It was submitted that his line of work could, on the evidence, be described as "volume work" and his evidence of a lengthy conference having taken place with the plaintiffs, which he claims to remember in detail, does not sit well with such high turnover work. Mr Arkoudis in cross-examination said that he had worked in places where he was "processing 50 matters a day". He said he did not process that number at Lenehan & Co but that it did constitute the highest volume of his work at that firm.

It was submitted for the plaintiffs that it was extraordinary that anybody in the position of the plaintiffs, if given strong legal advice from a solicitor as allegedly given by Mr Arkoudis, would have then proceeded with executing the documents if they in fact understood what the documents involved, including, in particular, an extremely high interest rate and a requirement to refinance in two months.

It was submitted that the plaintiffs had no need for the loan money. Further, their personal background history reveals that they were not risk-takers. Therefore, the submission proceeded, if Mr Arkoudis had advised them as he alleges, the expectation is that they would have heeded the advice. As discussed below, they had engaged solicitors on a number of occasions in earlier years.

It was further submitted that if in fact Mr and Mrs Bakovski had been asked by Mr Mitrevski to borrow money so they could lend it to him, there is no reason why they would not have approached Mr Hastie, a financial advisor, who had previously undertaken finance work for them. There was, in the circumstances, no reason for them to rely upon Mr Mitrevski's lender or to leave it to Mr Mitrevski to arrange the loan to them, if it was to be a loan to them, and not a guarantee arrangement.

It was submitted that Mr and Mrs Bakovski could be expected to remember the meeting with Mr Arkoudis as it was associated with a series of events in a short period of time that led to catastrophic results for them. However, it was agreed that is not so with Mr Arkoudis.

Whilst Mr Arkoudis claims that he spent an hour or more in relation to the Accom loan/mortgage transaction with the plaintiffs, Mr Finnane's submission was, in effect, that the account has to be considered having regard to the fact that the day on which the conference was held was on an otherwise busy day. The total fee was only $250 and the conference was one of many attendances associated with "volume work".

It was also observed that not only was Mr Arkoudis' account entirely dependent upon his memory, unaided by any note or record of conversations which took place many years before, but that it was said that his memory was put to the test in 2010 when he answered queries from the Legal Services Commissioner. It was contended that the evidence concerning his responses to the Commissioner shows that his alleged memory of what took place was seriously flawed, containing material errors.

Mr Arkoudis conceded in cross-examination that the letter of 18 May 2010 to the Commissioner contained a number of errors. I do not here set out the detail of them as they are discussed under the heading "Consideration" below. It is sufficient to note the number and nature of errors contained in the letter of 18 May 2010 are important matters to be taken into account on the issue of the reliability of Mr Arkoudis' evidence as to the statements he said he made at the conference of 13 August 2004.

It was observed in the written submissions for the plaintiffs that the challenge made by the defendants to their account as to what was said in the conference with Mr Arkoudis centred upon whether or not they understood that Mr Mitrevski was the borrower and that they were providing security of the property to assist him.

The plaintiffs' case is that they were unaware of the fact that they were the borrowers until their financial adviser, Mike Hastie, drew their attention to it at a later time. Mrs Bakovski said this occurred some time after 13 October 2004: Plaintiffs' Written Submissions at [79].

It was submitted that the only evidence relied upon to support the defendants' contention, apart from the loan-related documents themselves, that Mr and Mrs Bakovski understood that they were the borrowers prior to October 2004, was the affidavit of Mr Sharpe at [8] and [13].

However, for reasons which will be examined below under the heading "Consideration", there were a number of matters put to Mr Sharpe which, it was submitted for the plaintiffs, indicated that his evidence based on recollection as to what actual words were spoken by Mr and Mrs Bakovski to him is unreliable.

In summary, it was contended that the file note relied upon by Mr Sharpe did not provide a sound basis for him in reconstructing the particular conversation that had occurred when the plaintiffs spoke to him. It was submitted that Mr Sharpe had conceded that he had a limited recollection of the precise words used at the conference.

The plaintiffs' evidence, Mr Finnane noted, was that they did not read the documents and furthermore they were not asked by Mr Arkoudis to read them.

On the issue of causation, it was submitted that if proper and appropriate advice had been given to Mr and Mrs Bakovski it would have been brought home to them that they were being asked to borrow money in their own names at extraordinarily high rates and without any security from Mr Mitrevski. This, it was submitted, would have led to them accepting advice and then not proceeding with the transaction. As earlier noted, it was observed that they had no need for the money and they were not "risk takers".

In summary, the submission in this respect was that, properly advised, Mr and Mrs Bakovski would have been alarmed and very concerned at the transaction that was being processed in their name if properly understood by them. Mr Finnane supported the submission by what was known about them - that they were not business people, they were not property developers and they were not property speculators. Nor, it was observed, were they people who lent out money as part of a business: "... They would have been very concerned at this risky transaction and they would not have proceeded, in my submission." (T 280:4-6)

Additionally, in relation to causation, reliance was placed on Mrs Bakovski's evidence to the effect that she, having dealt from time to time with solicitors over the years, had come to trust them to look after their affairs. Mr Finnane observed that the plaintiffs were unsophisticated working class people and that if given a proper explanation and advice by a solicitor they would have respected it and responded appropriately to it.

In response to the cross-examination of the plaintiffs to the effect that they did not question the arrangement that they had with Mr Mitrevski - that they did not make inquiries as to whether Mr Mitrevski had a development at all, or whether he had sold the number of units he said that he had sold, or the amount of money that he was proposing to borrow on the security of their property and such like matters - these all could be readily explained. Mr Finnane in his reply submissions contended that this lack of inquiry simply reflected the fact that Mr and Mrs Bakovski lacked understanding as to risk, in particular, the risk associated with what Mr Mitrevski had asked of them. Mr Finnane observed that they had not been in a situation like this before and had no appreciation of the risk: T 266:30-40.

The fact that the plaintiffs had not understood the risks involved, it was submitted by Mr Finnane, was relevant to the likelihood that they would have accepted advice about the transaction and not have proceeded with it had they been advised. Further, that in itself, it was submitted, supported the proposition that the advice Mr Arkoudis alleges that he gave them was in fact not given: T 266:40-45.

From the plaintiffs' point of view the arrangement with Mr Mitrevski and with Accom, it was submitted, was all, in effect, one transaction. Further, it was submitted there was no support in the evidence for the conclusion that, if properly advised, they would have been happy to have acted as guarantor: T 280:15-25.

Further, it was contended that there was no reason to suppose that if Mr Mitrevski had been put forward as the borrower that the Accom transaction would have proceeded. Presumably, it was submitted, there was good reason as to why Mr Mitrevski did not put himself up as the borrower with the plaintiffs simply as guarantors: "... Presumably if a lender looked at Mr Mitrevski they would have been very concerned about lending money to him. That is why he didn't have his name anywhere near those documents." (T 280:25-30)

In relation to a solicitor's obligation to make inquiries to ascertain the nature of the transaction, it was submitted that Mr Arkoudis had an obligation to ask questions and seek clarification from the plaintiffs, but he had not done so. Had he sought information from them he would have learnt, it was submitted, that this case was very much like a guarantee case: "... It was at least as bad as a guarantee situation because the borrowers weren't actually receiving the money. They were just going to be liable for it." (T 291:45-T 292:2)

Further, Mr Finnane observed that this was not a case where Lenehan & Co had been engaged to both settle a mortgage and draw down the loan amount on settlement. Had they been so engaged they would have seen that the money was not going to the borrower: "... There's some handwritten corrections on a copy of the drawdown authority but there's no indication really that the money is going to them or somebody else. So that's another aspect of it. Obviously on the defendants' case a question is asked, and what Mr Arkoudis is told indicates it is not like a guarantee situation, but in my submission there's still some inquiry to be made about whether a person really does know what they're doing." (T 292:10-21)

It was noted that the consequence of proceeding with the transaction was that Mr and Mrs Bakovski became indebted to Accom for an initial sum of $386,250.

By 10 December 2004 they were required to pay the sum of $521,834.15 to discharge their liability along with fees to Bransgroves of $4,145.29.

The plaintiffs also incurred expenses in refinancing the loan including brokerage fees and prepaid interest for twelve months. Accordingly, their loss and damage as at 10 December 2004 was $585,155.52: Plaintiffs' Written Submissions at [105].

The plaintiffs' claim includes a claim for interest on the above amounts. The basis for calculation is explained in the plaintiffs' written submissions at [106]-[107].

A claim is made on behalf of the plaintiffs for compound interest representing the cost of borrowing money to replace money paid in consequence of the defendants' alleged breach of contract or negligence. It was submitted that the interest paid by the plaintiffs was directly related to the wrong and was not too remote: Plaintiffs' Written Submissions at [109]-[115].

The plaintiffs' written submissions set out the components of interest claimed commencing on 10 December 2004: at [133].

The basis of the plaintiffs' claim is summarised at [134]-[137].

In support of their claim a document "Plaintiffs' Schedule of Damages and Interest" was provided which set out the basis for the claims referred to above.

In support of the claim it was submitted that it is clear that the plaintiffs needed to refinance the money when they did and that accordingly they took the necessary steps to that end. It was submitted that it would be inferred, even if not expressly stated, that they did not have the cash to repay Crown & Gleeson and Accom. The total amount that they borrowed was $1.85 million in December 2012.

In order to get the refinance they had to agree to prepay the interest. It was submitted that this was part of the loss and damage that flows from the breach of duty of care by the defendants.

The submission was that the loan involved a liability on the part of the plaintiffs which needed to be met in some way. They could not continue to allow it to compound (at a rate of 96% per annum): T 288:35-45.

The defendants relied upon the Defendants' Outline of Submissions dated 24 April 2013, supplemented by oral submissions.

In his oral submissions Mr Curtin referred to what took place at the meeting of 13 August 2004 as "... the ultimate fact in issue": T 299:6.

In this respect he submitted that the relevant Accom loan documents that were signed by the plaintiffs had two evidential effects: (i) They established the nature of the transaction that was entered into; and (ii) Together with three or four other matters referred to in the submissions, they constitute evidence relevant to the conversations between the plaintiffs and Mr Arkoudis (what Mr Curtin referred to as a "... piece of Fox v Percy evidence": T 299:5-12.

For the defendants it was submitted that, in this case, it was important and indeed necessary, in the making of factual findings to proceed in accordance with the approach discussed in Fox v Percy (2003) 214 CLR 118 (per Gleeson CJ, Gummow and Kirby JJ) at [30]-[31].

In this regard, emphasis was given to the need to limit reliance upon the appearance or demeanour of witnesses and, so far as is possible, for the court to rely upon contemporary materials that objectively establish facts and the apparent logic of events.

Reference was also made to the well-known observations in Watson v Foxman (1995) 49 NSWLR 315 per McLelland CJ in Eq.

It was contended, contrary to the submissions that were made on behalf of the plaintiffs, that their case is entirely reliant upon them being accepted as accurate and credible witnesses: Defendants' Outline of Submissions at [5].

It was accepted for the defendants that the scope of the relevant duty included facts that put Mr Arkoudis on notice that the plaintiffs' interests were at risk and he should say something about such facts. However, it was not conceded that Mr Arkoudis was under a duty to make inquiry in order to find out facts: T 299:20-25.

As to the particular matters arising in this case concerning the interest rate proposed to be charged on the Accom loan, and other matters concerning it, it was submitted that Mr Arkoudis did give advice in strong terms to the plaintiffs not to enter into the transaction and that they should get financial advice as stated in paragraph [69] of his affidavit.

It was further submitted that the first complaint by the plaintiffs on the evidence concerning Mr Arkoudis was to the Legal Services Commissioner in the correspondence in 2010: T 300:25-30. However, as discussed under "Consideration" below, this contention needs to be assessed in light of the complaint made by the plaintiffs to Mr Hastie in October 2004.

Mr Curtin submitted, in effect, that in terms of the Fox v Percy approach, it would be expected that, when the plaintiffs discovered that they were the borrowers some two months after they saw a solicitor, that they would then say something about that fact: T 300:45-50.

In particular, when Mr Hastie told them that they were in fact borrowers, the expectation would be that they would have said that Mr "Arkoudis did not tell us that". T 301:15-20.

The further "Fox v Percy evidence" relied upon by the defendants was that the plaintiffs were highly motivated "... to do what they could to ensure Mr Mitrevski got the money he was after": T 301:33-35.

This is a reference to the evidence that they had tried to sell the Belmont property for some ten years without success and that they had some issue with the local council which would require them to spend some money to clean up Belmont, and that Mr Mitrevski said that he would be prepared to pay $7 million for that property.

In addition to the motivation to sell the property to Mr Mitrevski, the defendants in their submissions relied upon the trust they had in him which, it was contended, was complete.

Prior to 13 August 2004, Mr Mitrevski had obtained the Certificate of Title from the plaintiffs for the property to be used as security for the Accom loan together with copies of the plaintiffs' identification documents and then set about making various loan applications to lenders. Accordingly, their willingness to sell to Mr Mitrevski, it was submitted, and their trust in him, are to be taken into account on the issues as to what Mr Arkoudis said to them, whether they were interested in listening to what he had to say, and also on the issue of whether any advice given by Mr Arkoudis would have dissuaded them from proceeding with the transaction.

The particular objective matters to which Mr Curtin referred were as follows: (1) The plaintiffs were highly motivated to do what they could to ensure Mr Mitrevski got the money he was after. They had tried unsuccessfully to sell the Belmont properties. There is some evidence that they were experiencing "financial hardship" as at April 2004. Mr Bakovski referred to the fact that at some unspecified time(s) the properties had been vandalised. Mr Mitrevski said he would pay $7 million to buy the Belmont properties, over $2 million more than Mr Bakovski had indicated to Mr Mitrevski that he was prepared to sell (that is, for $5 million). (2) Mr Mitrevski's sister was well known to the Bakovski family. Mr Mitrevski, though not as well known to them, was someone they came to trust. That trust, which developed in the discussions over the Belmont properties, led them not to inquire as to how much Mr Mitrevski wanted to raise on the security of one of their properties and they asked no questions about the Malua Bay development or the truth of Mr Mitrevski's representations about it. As noted above, they gave Mr Mitrevski the Certificate of Title and signed a number of blank forms, some of which were connected with ProPex (in particular, loan application documents dated 10 August 2004). Additionally, Mr and Mrs Bakovski gave evidence that they knew what a mortgage and a guarantee were. They understood, they said, that they would be guarantors and mortgagors for Mr Mitrevski. (3) As to the absence of any file note by Mr Arkoudis, it was submitted such absence can be rationally explained. In this respect: (i) As the plaintiffs only arrived 20 minutes after Mr Arkoudis received the electronic version of the loan/mortgage documents from Bransgroves, there would not have been sufficient time to open a file. (ii) Mr Arkoudis said he usually had a note pad on his desk which he would use to make notes during a conference. He said he made some notes on 13 August 2004, mostly calculations and he said he wrote down some clause numbers. In evidence there was reference by Mr Arkoudis to having made a "running sheet". He gave evidence that he had intended "perhaps" to complete the file note but that did not occur (it was accepted there were no file pad notes or "running sheets" on file or produced in evidence). (iii) There were some handwritten notations on the Cheque Directions and Surplus Proceeds Details document (Exhibit A, vol 6 at p 1189). Mr Arkoudis' evidence was that those figures were placed there as a result of calculations on the note pad. It was said that these entries are contemporaneous in the Fox v Percy sense and were consistent with his explanations. (iv) The handwritten notation, ie, figures, referred to above, were argued as supportive of the giving of legal advice, a matter strongly disputed in the submissions for the plaintiffs. (4) If Mr Arkoudis is accepted as an honest practitioner then what the loan documents signed by the plaintiffs assert in them was in fact done and they constitute "contemporaneous" documents: T 307:1-6. Reference was made to documents identified in Mr Arkoudis' affidavit at [45], in particular, those referred to at 33, 34-35, 37 and 38-39. I will refer again to the submission made on these documents below under "Consideration". The significance which the defendants' submissions sought to attach to them, they having been signed by the plaintiffs, of course assumes, contrary to their evidence, that they were in fact given an explanation as to the nature and content of the documents for they had not seen or read the documents before they signed them at the conference. Mr Curtin's submissions referred to the fact that the signed loan documents were designed for the lender's purposes, not for the borrower's purposes: T 310:10-16. The submission was put that they constituted objective circumstances, that is, upon the basis that Mr Arkoudis would be accepted as both an honest and a prudent solicitor who witnessed the plaintiffs' statutory declarations saying that they did receive legal advice: T 310:25-35. It is convenient to note here the contrary submission made on behalf of the plaintiffs. Mr Finnane disputed the premise that Mr Arkoudis had in this matter acted as a "prudent" solicitor in his conference with the plaintiffs. The failure by Mr Arkoudis to follow the "well established practice by solicitors" to make file notes (T 353:35-45) it was said was itself evidence of a lack of prudence and the absence of a careful approach. The fact that the cheque directions and drawdown documents contained blanks, that is, they not been filled out, Mr Finnane submitted, was a fact which Mr Arkoudis could have seen, and would not support an assumption being made to the effect that the plaintiffs would be getting the benefit of the funds: T 353:44-49; T 354:5-10. (5) Mr Curtin relied upon Mr Arkoudis' evidence as to his training and his experience and acting for lenders and borrowers. It was unlikely, it was submitted, that he would have departed from the required standard that applied to a solicitor so grossly. (6) It was submitted for the defendants that the plaintiffs did not assert, after Mr Hastie had obtained copies of the loan/mortgage documents, that they had been unaware of the fact that they were the borrowers of the loan advance made by Accom. However, the correspondence by Mr Hastie written to Mr Sharpe on 18 October 2004 on what the plaintiffs told him on that matter suggests to the contrary. (7) It was submitted for the defendants that the plaintiffs raised no complaint with Mr Arkoudis about the relevant events concerning the 13 August 2004 conference until 2010 and that it is not until years later that Mr Arkoudis had to recall why he did not keep a file note: T 315:10-20. Again, however, I note that on this point Mr Hastie's letter to Mr Sharpe dated 18 October 2004 suggests the contrary and is documentary evidence that must be brought into account as evidence that supports the plaintiffs: see discussion under "Consideration" below. (8) The inaccuracies or inconsistencies in Mr Arkoudis' responses to the Legal Services Commissioner's correspondence was said to be "peripheral to the central issues, that is, did he advise the plaintiffs they were borrowers, did he describe the interest rate, did he advise them to get independent financial advice". It was submitted that, on the balance of probabilities, a finding should be made that he did those things: T 316:5-15. (9) Additionally, it was submitted that the evidence of the plaintiffs was that they had a strong belief that a solicitor who had them sign documents would explain them. However, notwithstanding such a belief, the plaintiffs did not ask Mr Arkoudis questions about the documents they signed. (10) Subsequent conduct can be looked to to see what was the plaintiffs understanding of the loan/mortgage transaction. Reliance was placed upon the plaintiffs' conference with Mr Sharpe, solicitor, on 30 August 2004, in particular, as to Mr Sharpe's reconstruction of the conversation he said he had with them on that occasion. This aspect, referred to earlier, will be separately considered below. (11) Reference was made to the plaintiffs' late August 2004 dealing with Crown & Gleeson as some evidence on that later occasion that the plaintiffs knew they were borrowing funds from that entity: T 320-321. (12) Other "pieces of evidence" relied upon by the defendants were the plaintiffs' statement to police (Sgt Bilek - Exhibit 1 at p 90, dated 12 November 2004) concerning the Accom loan.

The primary factual issue in these proceedings concerns the events associated with the conference that took place in the offices of Lenehan & Co on 13 August 2004, in particular, as to what was said and what, if any, advice was given on that occasion.

That issue necessitates inquiry into the following: (1) Whether the plaintiffs understood the nature of the transaction they entered into on 13 August 2004. In particular, whether they understood that they themselves were entering into a loan transaction with Accom or whether they understood and believed that Mr Mitrevski was to be the borrower, with them providing the security for a loan to him. (2) Whether before entering into the loan and mortgage transaction: (a) Mr and Mrs Bakovski received from Mr Arkoudis an explanation as to the effect and significance of the proposed loan/security transaction having regard in particular to the harsh and oppressive terms proposed for the loan; (b) Whether they were given specific advice by Mr Arkoudis against entering into the transaction.

The content of oral communications, so far as possible, should be determined by reference to contemporaneous documentation such as file or other memoranda, emails or other correspondence. In this case, the fact that Mr Arkoudis did not make a record of information or advice he says he provided the plaintiffs at the conference (and the fact that the plaintiffs also do not have any record of what was discussed) leaves the resolution of the disputed matters to be undertaken by analysis of the affidavit and oral evidence given by the parties with due attention to any objective facts or matters that assist in determining which version of events should be accepted as the plausible and correct one.

The ultimate provision of finance by Accom, on the plaintiffs' case, involved an arrangement that had a tripartite aspect to it: a request by Mr Mitrevski to Mr and Mrs Bakovski for their assistance in obtaining finance (agreed to by both Mr and Mrs Bakovski), and, as events transpired, an application by the plaintiffs to Accom leading to the loan/mortgage transaction.

The plaintiffs' account was challenged by the defendants, inter alia, on the basis (i) that they knew that their application to Accom was an application by them as the borrowers and not as guarantors of a loan to Mr Mitrevski, and (ii) that they were motivated to enter into the transaction.

The issue as to whether the plaintiffs knew that they were entering the transaction as borrower is relevant to the issue of their credibility and also to the question of their motivation in entering into the transaction. If they did not, then it is at least consistent with their contention that they were not assisted in understanding the transaction by the provision of legal advice.

I have earlier observed that Mr Bakovski appeared to me to be a conscientious witness. I did not gain the impression that he was careless with the truth. He was a man of working class experience with reasonable intelligence without exhibiting any marked level of sophistication. He had some evident limitations as earlier indicated with the English language, in particular, in its written form.

Mrs Bakovski impressed as a sincere and intelligent witness and she was quite articulate. Her history indicates that in this country she held employment positions over many years. A whole view of her evidence gave the impression of her a being a witness who was endeavouring to give her best and honest recollection of events.

These observations as to personal characteristics, of course, are based upon the appearance of each given in the course of cross-examination, Mrs Bakovski's evidence having been somewhat more extensive than that of her husband.

Mr Arkoudis has been a practising solicitor for many years. In accordance with the summary of his employment earlier set out, he had been employed as a solicitor by a number of firms and other entities and in such employed position his practice involved loan and mortgage work. In these proceedings, as was the case with the plaintiffs, there was no attack upon Mr Arkoudis' integrity so much as a challenge to his reliability, including in particular, his capacity to recall accurately events concerning the conference of 13 August 2004 without the aid of any notes and having regard to his prior inconsistent accounts as to a number of matters concerning advice he said he had given to the plaintiffs.

The surrounding circumstances of the conference of 13 August 2004, to which reference has already been made, are also matters to be borne in mind. Not only were the terms of the Accom loan extraordinary, so also were the circumstances leading up to the conference with Mr Arkoudis.

As the summary of events concerning the lead up to the conference between the plaintiffs and Mr Arkoudis set out below reveals, the plaintiffs became involved in what may be considered or described as an orchestrated exercise by Mr Mitrevski.

Mr Mitrevski plainly intruded into the plaintiffs' property affairs on the basis of an alleged interest in buying the Belmont properties for $7 million. He appears to have set about winning the plaintiffs' trust as a fellow Macedonian with family connections. Additionally, I note that the plaintiffs may be said to have been somewhat vulnerable in that the evidence suggests a certain guilelessness in them which, as events appear to show, worked to Mr Mitrevski's advantage.

The plaintiffs had, by their personal earnings and, in the case of one property, through an inheritance, managed to build up a portfolio of modest residential properties. They appear, so far as the evidence permits, to have led an unostentatious lifestyle and there is no suggestion in the evidence that they had at all previously been careless in matters of property. They consistently over the years had turned to Mr Sharpe senior for legal advice and legal services. Those services had, it seems, been largely limited to conventional property sale and purchase transactions and associated mortgage borrowing. There is no indication that, prior to the subject case, they had been involved in commercial transactions or more sophisticated property transactions or had been inclined to engage in risk-taking activity. They had not been in business or involved in high risk-prone ventures.

As earlier noted, the events leading to Mr and Mrs Bakovski attending the offices of Lenehan & Co, occurred at a quick pace. They may be briefly summarised as follows: (i) The plaintiffs signed various documents at Mr Mitrevski's request. They included an application for finance Mr Mitrevski had made to ProPex: Mr Bakovski's first affidavit at [47]-[53]. (ii) Not long before 13 August 2004, Mr Mitrevski advised the plaintiffs that he had organised finance. (iii) On 13 August 2004, Mr Mitrevski picked up or drove with the plaintiffs to the offices of Lenehan & Co in York Street Sydney, gave them $250 in cash, told them to use it to pay the solicitor, and told them to ask for a Mr Arkoudis. (iv) At approximately the same time, the loan documents were being electronically sent to Lenehan & Co. (v) Twenty minutes after Lenehan & Co received the material the plaintiffs were in the reception area of the solicitor's office. (vi) The plaintiffs were almost immediately taken to the conference room where they met Mr Arkoudis. According to their evidence, he had documents in front of him on the table.

The plaintiffs, unexpectedly from Mr Arkoudis' viewpoint, arrived in the reception of Lenehan & Co area as no appointment had been made. Mr Arkoudis, in relation to the request by Ms Thanudchang to see the plaintiffs, said in his affidavit at [43] that he said to her: "I wish you would give me more notice. Ok get them to come in." That comment suggests that the lack of notice had caused some inconvenience to Mr Arkoudis. Whatever he had been doing up to the time when the plaintiffs arrived unannounced, Mr Arkoudis was then in a position whereby he would see them immediately or not. Clearly, Ms Thanudchang conveyed that she wanted him to see them as soon as possible. Mr Arkoudis met her request and ushered the plaintiffs into his office or conference room.

In this account of the fast-moving events of 13 August 2004, the plaintiffs' position was, on the evidence: (a) They had no documents with them when they arrived at Lenehan & Co; (b) They had not seen or read the documents Lenehan & Co had not long before received from Bransgroves Mortgage Solicitors; (c) They had not bee informed of any proposal for them to be borrowers; and (d) They had never met Mr Arkoudis before.

Mr and Mrs Bakovski gave evidence: (i) The terms of the loan/mortgage documents were neither read nor explained to them; (ii) That Mr Arkoudis did not give them advice as he claims; and (iii) They had no idea how much finance Mr Mitrevski had sought from Accom. (iv) That (at least based on Mrs Bakovski's evidence) the conference was of short duration (estimated as approximately 15 minutes).

On Mr Arkoudis' version of events, the plaintiffs did not say very much. Indeed on his account, Mrs Bakovski (who on the evidence and based on her presentation in oral evidence, was the articulate one of the two), appears to have said very little. As to words he attributed to Mrs Bakovski (the more articulate of the two) in the conference, see paragraphs [52], [53], [66] and [69] of Mr Arkoudis' affidavit. On Mr Arkoudis' account, Mr and Mrs Bakovski simply answered some questions he put to them rather than either of them asking questions or initiating conversation. However, Mr Bakovski's evidence was: "Mr Arkoudis did not say very much during the meeting. He did not talk to me or Vera about what documents we were signing. He just had us sign the documents and that was all": Mr Bakovski's first affidavit at [66].

He later said: "I thought that Mr Arkoudis seemed very serious throughout the meeting".

Mrs Bakovski said "... Mr Arkoudis did not say very much during the meeting and the meeting was very rushed": Affidavit sworn 22 November 2011 at [100].

There is a significant variation in the evidence as to how long the conference lasted. The plaintiffs both said it was relatively brief (about 15 minutes). Mr Arkoudis, on the other hand, said his recollection was that it lasted approximately one hour. There is no independent objective evidence that resolves the question as to how long it lasted. As noted earlier, Mr Arkoudis made no note that recorded the time taken, nor did he make an appointment note in a physical or electronic diary. He said this was because the conference was arranged at short notice: Affidavit at [79].

The fact that the evidence established that Mr Bakovski has very limited capacity to read English is, of course, relevant to his ability to have read and understood the Accom loan documents. Mr Arkoudis' evidence did not address Mr Bakovski's ability to read English. Mrs Bakovski does have an ability to read English although the evidence established that she had some limited difficulties as earlier discussed. There is no suggestion she had read the loan agreement or mortgage document. She said she did not.

The above circumstances - the speed with which events proceeded, the rushed arrangements to have the plaintiffs attend on a solicitor they had never met, Mr Arkoudis, the fact that the plaintiffs had not seen and read the loan documents before they signed them in Mr Arkoudis' office, their relative lack of sophistication in financing/guarantee transactions - are all circumstances to be considered on the issue as to whether the plaintiffs had an understanding that the loan had been structured on the basis that they would be the borrowers, not Mr Mitrevski. In resolving this aspect, there is also to be taken into account that Mr Mitrevski, on the plaintiff's evidence, had conveyed to them that he would be the one who would seek out loan finance and that, according to what the plaintiffs say he told them, he would be the one who would borrow the monies from Accom.

It seems likely, on the evidence, that Mr Mitrevski would not have been able to satisfy a lender to lend to him as borrower. Given Mr Mitrevski's conduct in the matter it would be at least consistent that he would say one thing to the plaintiffs and then subsequently organise matters to suit himself, that is, by making the plaintiffs parties to the loan agreement instead of himself without making clear to them what he had organised.

I turn to Mr Curtin's submissions concerning the fact that the plaintiffs signed a number of documents. These included, in particular: the Declaration by Borrower (Exhibit "JA 1" to Mr Arkoudis' affidavit at p 37); the Acknowledgment of Legal Advice by Borrower (Exhibit "JA 1" at p 38), as well as the other documents referred to by him in paragraph [81] of his affidavit). The defendants relied upon these as evidence that the plaintiffs knew, or must be taken as knowing, that they were entering into the transaction with Accom as borrowers.

The defendants' contention was that because the plaintiffs signed the documents their acts in doing so may be taken as evidence that they had received advice from Mr Arkoudis (for example, the Acknowledgment of Legal Advice by Borrower document). In other words, those documents may be taken as evidence that the strong advice and warnings Mr Arkoudis said he gave the plaintiffs was/were given.

However, I do not consider that these documents of themselves necessarily provide or constitute cogent evidence that such alleged strong advice and warnings were given. Firstly, the documents do not refer to any advice having been given directed to what were the undoubtedly harsh and oppressive conditions on offer or to any advice given by him to the plaintiffs to the effect that they should not enter into the loan transaction. The documents do not provide any evidence of any advice given on such matters nor to any "warning" having been given. Further, I accept as valid the submission for the plaintiffs in paragraph [12] of their written submissions: "Mr Arkoudis, on the other hand, does not have any corroboration. There is no file note. The executed documents themselves do not corroborate him, because they are consistent with both his account and Mr and Mrs Bakovski's account. None of the documents that were executed purports to say anything about critical issues such as Mr Arkoudis's alleged advice not to enter into the loan, Mr Bakovski's insistence that he proceed, Mr Bakovski's explanation of what the finance was for, Mr Arkoudis's advice that the terms be negotiated, and Mr Bakovski's refusal to follow that advice."

Finally, on this aspect, Mr Moses in his statement at [46] observed: "... These acknowledgements however do not record the giving of additional advice, in particular as to the need to obtain financial advice which the solicitor deposes to having given to the plaintiffs."

Mr Bakovski, in his affidavit sworn on 22 November 2011, said that Mr Raymond M (Mike) Hastie was a mortgage broker who had and his wife had dealt with prior to 2004: at [151]. Mr Hastie was the broker who later organised funding for the plaintiffs from Liberty Financial in order to avoid the security properties being sold by the finance companies: at [152].

The plaintiffs met with Mr Hastie in approximately the first half of October 2004, that is, approximately two months after the conference with Mr Arkoudis of 13 August 2004. Based upon the information he obtained from the plaintiffs, Mr Hastie set out his account of the facts that had been related by them in a series of dot points in his letter to Mr Sharpe dated 18 October 2004: Exhibit 1 at p 83. The last of the dot points contains his account based upon what the plaintiffs had told him, of two matters - (a) their understanding as to the identity of the borrower of the loan and (b) the issue of whether they had or had not received legal advice.

I have earlier referred to this aspect but for convenience I reproduce what Mr Hastie wrote in these respects in his letter to Mr Sharpe: "I do know that the money borrowed by Mitrevski from Accom Finance and Crown and Gleeson Securities is the most expensive finance that anyone could wish to borrow on short term but most importantly that Mr and Mrs Bakovski, I understand, did not receive any legal advice and the money did not go into their account for them to onlend to Mitrevski. Obviously there is a major legal claim developing and would need some time and effort to put it together chronologically to enable anyone to understand what has happened, along with all documents and persons involved etc. I think the clients have been basically taken advantage of ..." (my emphasis)

Mr Hastie's letter to Mr Sharpe is a reasonably contemporaneous record of what he asserted in his letter had been said on the above matters to him by the plaintiffs. Further it is noted that his letter does not suggest that it was written at a time when the possibility of any legal action against the defendant solicitors was a matter that had been discussed or even contemplated at that early stage. The focus of the letter (and as reflected in it of the plaintiffs) at that point was upon Mr Mitrevski and refinancing arrangements. That is relevant for the following reasons: (i) The statement in the last dot point of the letter, namely, that Mr and Mrs Bakovski "did not receive any legal advice", page 1, was recorded by Mr Hastie as a statement that had been conveyed to him by the plaintiffs when attending to a proposed refinancing of the previous loans. As noted above, when relating facts to Mr Hastie there was no consideration then being given to legal proceedings against Lenehan & Co and/or Mr Arkoudis. (ii) The reference contained in his letter "... but most importantly that Mr and Mrs Bakovski, I understand, did not receive any legal advice ..." may be said to be evidence of an objective nature, in the sense that it is reasonably contemporaneous evidence as to the state or content of the plaintiffs' knowledge as conveyed to Mr Hastie, of what had occurred (or not occurred) at the time of signing the Accom loan documents as at a point in time approximately two months after the conference with Mr Arkoudis on 13 August 2004. Mr Hastie's statement as to what the plaintiffs had said to him on this aspect is consistent with, if not corroborative of, the plaintiffs' allegation in the Statement of Claim in these proceedings that they had not received legal advice. It is also evidence that is favourable to them on the question of their credibility. (iii) The further reference in Mr Hastie's letter to Mr Sharpe is also evidence relevant to their stated understanding as to who was the borrower of funds from Accom viz "I do know that the money borrowed by Mitrevski from Accom Finance ..." as conveyed to Mr Hastie by the plaintiffs. Again the statement is evidence relevant to their understanding or knowledge and to their credibility.

The assessment of Mr Arkoudis' credibility is to be made in light of his prior statements to the Legal Services Commissioner (or to the Commissioner's delegate) as to his accounts of the matters discussed in the conference of 13 August 2004. An examination of Mr Arkoudis' responses to the Legal Services Commissioner reveals a number of inconsistencies. The statements also contain errors.

In the written submissions for the defendants it was accepted that Mr Arkoudis' responses to the Legal Services Commissioner contained "some factual inaccuracies". However, such inaccuracies were sought to be characterised as inaccuracies that "... only relate to minor matters ...": at [29].

I respectfully disagree. The "inaccuracies" in Mr Arkoudis' prior statements relate to matters of significance. They are not, and cannot, in my judgment, be characterised or considered to be "minor". The number and nature of the errors and additionally, in some instances, the inconsistencies, all made by a solicitor who failed to make any note or create any other form of record as to what he now acknowledges was an "unusual" loan/mortgage transaction containing onerous conditions, plainly require close examination.

Before turning to the detail of the "factual inaccuracies" in Mr Arkoudis' statements, I note the following matters. First, the first and second responses by him to the Legal Services Commissioner's inquiries are not consistent with each other. Second, the letter of 16 August 2010 failed to inform and correct erroneous information that was contained in the first response. Third, Mr Arkoudis' affidavit refers in some detail to a number of statements he made to Mr and Mrs Bakovski (at [53]-[69]) but these are not found in his letter to the Legal Services Commissioner the Legal Services Commissioner in reply dated 18 May 2010 or in Mr Arkoudis' memorandum dated 16 August 2010.

In relation to this letter sent to the Commissioner, I note the following matters: (1) Mr Arkoudis accepted that the reference in this letter, namely, that the plaintiffs "should wait for long term finance at a reasonable rate which was expected to come through within 2 months, from a client of Kremniser [sic]" (para 1(a)), was wrong. No application had in fact been made then (or any time) for long-term finance by or on behalf of the plaintiffs from a client of Kremnizer, solicitors. Additionally, there was then no arrangement in place whereby finance was "expected" to come through in two months time. (2) The reference in paragraph 1(b) of the letter to documents being received "from Kremniser [sic], which were completed at the request of Mr and Mrs Bakovski and witnessed by James Arkoudis" was wrong. The plaintiffs had not completed any such a request. There was no request sent by Kremnizer concerning the plaintiffs and Mr Arkoudis had not in fact witnessed any such request being made or completed by the plaintiffs. No such documents were sent to a broker "for finalisation" as referred to in paragraph 1(b). Further, the balance of the matters referred to in para 1(b) had no application or relevance at all to the plaintiffs. (3) Mr Arkoudis accepted in cross-examination that there was no reference in his affidavit in these proceedings to a statement having been made by him to the plaintiffs concerning the desirability of waiting for long term finance at a reasonable rate: T 163:10-16. (4) The statement "The documents for the short term loan were submitted to the Borrowers by Bransgroves" in paragraph 1(a) of the letter of 18 May 2010 was incorrect. The documents, as discussed above, had been electronically transmitted on 13 August 2004 by Bransgroves directly to Lenehan & Co. Bransgroves, accordingly, did not submit the documents, or any copies of such documents, to the plaintiffs. (5) Apart from this statement being factually incorrect, Mr Finnane observed that the significance of the documents having been sent directly to Lenehan & Co on the day of the conference was that the plaintiffs had not seen the documents before they arrived. Accordingly, they had no opportunity of reading them before the conference. Further, it was submitted that the evidence of the plaintiffs in this respect was consistent with their account, namely, that when they entered the conference room the papers were on his desk in front of them: T 255:1-5. (6) The statement in paragraph 8 of the letter of 18 May 2010 "... our involvement was to complete documents, and return them to the broker" did not reflect what had occurred after the documents were signed. Lenehan & Co did not, as earlier noted, return them to Bransgroves. They were delivered to Bransgroves by the plaintiffs. (7) In relation to the statements in paragraph 10 of the letter of 18 May 2010: "We were informed that it was interim finance, pending a loan through Kremnizer. We advised that they should wait for the loan through Kremnizer, and that the interim finance should be dispensed with, as too expensive, and too dangerous", there was then no arrangement for "interim finance" pending a loan through Kremnizer or anyone else. In particular, no loan was ever contemplated by the plaintiffs from a client of Kremnizer or any loan coming through Kremnizer.

In relation to the letter of 18 May 2010, Mr Finnane submitted: "It (the letter of 18 May 2010] was incorrect but it involved a reconstruction of a whole series of events which would have included the giving of advice if Mr Arkoudis did indeed have the practice that he claims to have had. He does not then correct any of these errors in the subsequent letter." (T 269:5-10)

It was further submitted on behalf of the plaintiffs that a careful solicitor in considering the question raised on behalf of the Legal Services Commissioner "is there any record ... by Mr Arkoudis?", would have checked to see if there was any record of the loan, been alerted to the fact in this case that there was no record and to the fact that what had been said in the letter of 18 May 2010 was "suspect": T 269:45-50.

The memorandum dated 16 August 2010 sets out an account that differs from that in the letter of 18 May 2010. It may be seen as given in the format of Rule 45 of the Revised Professional Conduct and Practice Rules 1995 ("the Practice Rules"), a copy of which is attached to Mr Moses' affidavit and discussed by Mr Moses in his statement attached to his affidavit at [11]-[28].

The covering letter from the Office of the Legal Services Commissioner dated 16 August 2004 (Exhibit A at pp 1337-8) posed five questions. Mr Arkoudis in answer to question 4 "Is there any record of a 'further loan from Kremnizer and the brokers' that was witnessed by Mr Arkoudis?", was answered: "4. See our letter of 18 May 2010": (Plaintiffs' Tender Bundle, vol 6, Exhibit A at 1357). Mr Arkoudis in cross-examination said he confirmed that that answer given in answer to question 4, was correct: T 161:1-2. However, in fact answer 4 in the letter of 16 August 2010 to the Legal Services Commissioner's question did not draw attention to the fact that the reference to Kremnizer in the letter of 18 May 2010 had been quite erroneous.

Mr Finnane submitted that the multiplicity of errors contained in the letter to the Legal Services Commissioner dated 18 May 2010 and in Mr Arkoudis' memorandum of 16 August 2010, both communications having been based upon Mr Arkoudis' memory, were evidence that his memory as to what was said at the conference was seriously flawed: T 267. Additionally, his affidavit did not contain reference to the statement set out in [428](1) above.

In reconstructing from the evidence the actual events that occurred in the conference between the plaintiffs and Mr Arkoudis there are a number of facts that are undisputed.

First, it was Mr Mitrevski who on 13 August 2004 created a sense of urgency for the loan transaction with Accom to be completed that day. As noted in paragraph [57], the ProPex documents had apparently been signed by the plaintiffs on 10 August 2004.

Second, prior to Mr Mitrevski picking up the plaintiffs on 13 August 2004 and taking them to Mr Arkoudis' office, the plaintiffs had no opportunity to consider the substance or terms of any loan arrangements that Mr Mitrevski had discussed and organised directly or through the broker with Accom. Before attending on Mr Arkoudis at Mr Mitrevski's request or direction, as noted above, the plaintiffs had not seen any loan or mortgage documents.

Third, the urgency factor appears to have had some impact on Mr Arkoudis, as discussed above. He, as earlier noted, had only received the loan documents electronically about 20 minutes before the plaintiffs arrived at the Lenehan & Co offices and had been given no notice that the plaintiffs were on their way to see him that day.

Fourth, whilst the plaintiffs had previous experience with purchasing residential property and loan finance over the years, they had never found themselves in the position they were in on 13 August 2004. Prior to attending at Lenehan & Co's offices on that day, there is no evidence that they had given consideration to or had agreed with Mr Mitrevski or anyone else that they would be joining in a property development project.

Fifth, as at the date of the conference with Mr Arkoudis, there was no evidence of an agreement or an arrangement in prospect or in place involving Mr and Mrs Bakovski for a long term finance facility at the expiration of the two month term of the Accom loan.

Sixth, the terms of the proposed loan with Accom which was entered into on 13 August 2004 were high risk and portentous of financial danger to individual borrowers such as the plaintiffs.

Seventh, Mr Arkoudis and Mr and Mrs Bakovski had never met before 13 August 2004. There is some evidence that the plaintiffs may have thought that Mr Arkoudis was Mr Mitrevski's solicitor which, of course, was not the position. See paragraph [71] above - Mr Mitrevski's reference to Mr Arkoudis as "... my solicitor ..." - see also [112]. Mr Arkoudis understandably had no knowledge of the plaintiffs' background, financial position or experience and, in particular, so far as Mr Bakovski is concerned, the extent of the limitation on his command of the English language.

Eighth, on the evidence, it must be taken to have been obvious to Mr Arkoudis that, having only minutes before seeing the plaintiffs received the loan documents and with the plaintiffs arriving at his office without notice, the transaction for which he was being retained was being urgently pursued for no apparent reason.

Ninth, it was not in issue that the extraordinary features of the proposed loan with Accom called for specific and very strong advice and warning from Mr Arkoudis to the plaintiffs.

Tenth, in accordance with common and prudent practice, it would in the circumstances of this case have been expected that, at least, a file note would have been made of any advice given to the proposed borrowers, that is, the plaintiffs.

Eleventh, Mr Arkoudis did not create a file note or other record of anything said by him to the plaintiffs. No contemporaneous note was made of any of the matters referred to in the letter of 18 May 2010 to the Legal Services Commissioner, or in the memorandum to the Commission of 16 August 2010, or to the matters referred to in his affidavit in these proceedings.

Twelfth, Mr Arkoudis' evidence of having made written notations of figures on the cheque directions documents, of his custom of using a writing pad to make notes and his evidence of making a "running sheet" do not explain or justify his failure to have made any file note in relation to a transaction involving the onerous, indeed oppressive terms.

Mr Stephen Sharpe swore an affidavit in the proceedings on 22 March 2012. He said his father had acted for the plaintiffs but he himself had not prior to 2004.

He said that in late August 2004, Mrs Bakovski attended his office. He said "I have a limited recollection of the precise words used at this conference": at [8]. He there set out the conversation in words to the following effect: "Vera Bakovski: We've borrowed money for a friend of ours Robert Mitrevski. There were two loans. We will give you the documents for the first loan. The second loan was by Crown & Gleeson. Crown & Gleeson lent $750,000. We have put our properties up as security. Mitrevski is in financial trouble and we are worried he is going to go overseas or something. George and I want you to draft a piece of paper saying that he owes us this money, for him to sign. Me: How much have you borrowed? Vera Bakovski: Over a million dollars. That is, the Crown & Gleeson loan plus the other loan of close to $400,000. Me: Well I can draft you an Acknowledgment of Debt but I don't think it's going to help you. The problem isn't proving he borrowed the money, it's getting it back off him. Vera Bakovski: We want you to draft it anyway. Me: Sure, but I don't think it will be worth the paper it's written on."

Mr Sharpe's file note of the conference held on 30 August 2004 was annexed to his affidavit ("SS-1"). It was made subsequent to the conference on 1 September 2004. In the first two paragraphs of the file note were the following terms: "Attendance on Mr and Mrs Bakovski on Monday 30th August 2004. They have brought in with them a Mortgage and some loan documentation whereby they had been advanced by one Mr Mitrevski $100,000.00 because they had some financial difficulties. In return they gave Mr Mitrevski the Title Deeds to a number of properties and Mr Mitrevski arranged on the documents I have before me, for a loan of $750,000.00 with interest at 15% per month but reduced to 10% if it's paid on time so it's costing them $75,000.00 a month secured over Mr and Mrs Bakovski's properties."

Mr Sharpe accepted that his file note may have been dictated before 1 September 2004: T 231:5-15.

He conceded that the conversation set out in paragraph [8] of his affidavit did not purport to an accurate verbatim account of what was said, but he said he was "doing the best to reconstruct the conversation with the aid of my file note": T 236:5-10.

He accepted that the first words attributed to Mrs Bakovski "we've borrowed money for a friend of ours Robert Mitrevski. There are two loans ..." may not be "100 per cent correct ...": T 236:25-30. He also accepted that there was nothing in his file note that purported to record anything about the precise words anybody said: T 236:30-35.

Mr Sharpe was asked about the conversation with the plaintiffs on 8 October 2004. In his affidavit he recorded Mrs Bakovski saying "We are refinancing the loans by Crown & Gleeson and Accom we have taken out ...". He said he did not prepare a file note of that conversation: T 237:1-5. He said it was a short conversation and when preparing his affidavit about it, his recollection of the conference was a "level of generality" he had described: T 237:44-50. In re-examination, as to paragraph [8] of his affidavit, he said that Mrs Bakovski said they had borrowed money from Accom: T 239:20-22.

I have referred above to one piece of evidence that assists in resolving the issue as to the plaintiffs' understanding and on the issue of whether it is likely that Mr Arkoudis gave the particular advice he referred to in his affidavit at [57]-[61] and at [65]-[67], namely, the letter from Mr Hastie to Mr Sharpe dated 18 October 2004: Exhibit 1 at pp 83-85.

On what has been referred to as the "ultimate factual issue" in the proceedings, the plaintiffs are in a position where they do have evidence of a reasonably contemporaneous account in that letter that provides support or corroboration of their evidence in these proceedings. Mr Arkoudis, on the other hand, is almost entirely reliant on his recollection years after the event.

As to Mr Sharpe's evidence, in the circumstances in which the statement he attributed to Mrs Bakovski the words "we've borrowed money for a friend ...", Mr Sharpe properly conceded that he was reconstructing a conversation that occurred many years before and he could not say that those precise words were spoken by Mrs Bakovski. I note his Memorandum dated 1 September 2004 does not include reference to such a statement. In these circumstances, it would in my opinion be unsafe to accept Mr Sharpe's account in paragraph [8] of his affidavit as a verbatim recollection. It is clearly an attempt many years later to reconstruct a conversation.

There are other references to statements by the plaintiffs in the evidence that are not all entirely consistent on the issue of whether they considered they were the borrowers or not. I have taken such inconsistencies into account. It is not possible to resolve all of them some of which has been referred to above. They may, at least in part, be a function of things said many years after the event and the uncertain reliability in the authors of documents accurately hearing what was said or accurately interpreting (or not) what was said on particular occasions.

Mr Sharpe conferred with Mrs Bakovski in his office on 5 November 2004. In his affidavit at [25] Mr Sharpe said he had "a limited recollection of the words used in that conference". A file note was made dated 8 November 2004: pp 21-22 of annexure SS-1 to Mr Sharpe's affidavit. However, he set out in that paragraph his reconstruction of the conversation. In it he said to Mrs Bakovski: "Me: ...From what you have told me, you have borrowed money from Accom and Crown & Gleeson and put your properties up as security. You lent the money advances by Accom and Crown & Gleeson to Mitrevski. You knew what you were signing. Vera Bakovski: Yes. Me: I am not sure there is a lot that can be done..."

The file note dated 8 November 2004 records, inter alia, aspects of a discussion concerning the first two loans in the names of Mr and Mrs Bakovski: "...They deny signing any of the documents apart from the original mortgages, which they took out the first two loans with which they say yep we signed them and we've got no problems with them even though we know we were stupid. We definitely signed them. They say all other signatures are taken off those documents." (File Note, p 2)

Mr Curtin's submission was that despite being shocked that they found out they were borrowers, they said nothing at all to Mr Sharpe about being concerned with the Accom loan. This was said to be a piece of evidence against the plaintiffs' case that they did not know: T 325:10-16.

Mr Finnane, in his final oral submissions, relied upon the following matters in response to the arguments put against him on the issue of the plaintiffs' knowledge as to their status and borrowers and their statements or reactions (for example, with Mr Sharpe) when there was discussion of them having been borrowers of the Accom loan: "The next aspect of the factual submissions and the final aspect relates to the attacks that were made on Mr and Mrs Bakovski going to their credit. Essentially the theme of the questioning, if I could put it that way, was that Mr and Mrs Bakovski understood that they were borrowers, as evidenced by various pieces of evidence from after the relevant transactions, therefore they must have understood that at the time of the transaction. That's the effect of what Mr Curtin was seeking to do. But all of those attacks need to be viewed in the light of the fact that both plaintiffs said that they learned that they were the borrowers from Mr Hastie. They would have learned this on or shortly after 13 October 2004. Vera Bakovski said that she learned the true position some time after 13 October 2004. The relevant part of her affidavit is around paragraph 211 at page 127 of volume 2. If I could just go back to page 126, she deals with the event on or about 12 and 13 October 2004. They meet with Mr Hastie and hand him copies of documents that they had been served in relation to Accom and Crown & Gleeson. Then at 209 he asked them to get the documents and then they received some documents and they take them to Mr Hastie. At paragraph 211 there's this conversation where Mr Hastie says, 'Do you know what you have done, Vera...we use Mr Sharpe.' So Mrs Bakovski doesn't place a precise time on that, but she says it was some time after 13 October. On 18 October Mr Hastie writes a letter to Mr Sharpe. In my submission this would have happened some time between those two dates because Mr Hastie has clearly got the documents prior to 18 October when he writes a letter to Mr Sharpe. He has spoken to Mr and Mrs Bakovski and he has told them what the real situation is. Any attacks on Mr and Mrs Bakovski concerning any records of police officers, Mr Hastie, Mr Sharpe, themselves or anyone else about what the transaction was really goes nowhere if the attack is because what is being said is the transaction was a loan to Mr and Mrs Bakovski. That was the fact, and Mr and Mrs Bakovski understood it as of 13 October or thereabouts." (T 274:14-46)

The above submissions, I consider, accurately capture the evidence as to the timing of the plaintiffs' knowledge as to their status as borrowers from Accom and the timing of them becoming aware of that fact and the source of that knowledge (that is, Mr Hastie).

The affidavit of Mr Arkoudis sets out at considerable length and detail (in particular, in paragraphs [49]-[69]) what he said he recalled saying to the plaintiffs and the statements they (principally Mr Bakovski) made in response.

The reliability of his evidence may be examined by reference to the following matters: (i) Mr Arkoudis' evidence was that he made a number of statements to the plaintiffs in the conference on 13 August 2004 in the nature of "strong advice" urging them not to enter into the loan/security transaction with Accom. (ii) Although he considered the loan contract with Accom was "extreme" and said he gave the strong advice referred to above, Mr Arkoudis made no file note or any note recording the advice purportedly given. (iii) The failure to make a file note or other record is contrary to the expected practice of an experienced solicitor. The evidence of Mr Moses was: "In my experience as a matter of standard practice when clients are given advice which they are not prepared to take, record this fact at least by way of detailed file note and often by way of having the clients sign a record of that advice." (Mr Moses' Statement at [45]) (iv) The failure to do so in the circumstances of the case, calls for explanation. However, as discussed earlier, the matters raised by Mr Arkoudis did not, in my assessment, constitute an explanation and certainly not a sound explanation. (v) Whilst the defendants' submissions placed some reliance upon the "Acknowledgement of Legal Advice by Borrower" signed by the plaintiffs: Exhibit 1 at pp 51-52, there is no reference either in paragraph 3 or paragraph 4 or in any other part of the Acknowledgment document to the fact that advice was given, in accordance with Mr Arkoudis' evidence, in "strong" terms. (vi) There was no adequate explanation given as to why there was no mention of the strong advice, and the plaintiffs' alleged rejection of it, in the "Acknowledgment of Legal Advice by Borrower". (vii) The non-existence of a file note or of any other document recording the "strong" advice allegedly given by Mr Arkoudis to the plaintiffs is, at least, consistent with the conference of 13 August 2004 having proceeded in the way in which both plaintiffs said it proceeded. (viii) The reliability of the recollection of a party or witness in proceedings may be weakened or thrown into question by the party or witness having made prior erroneous or inconsistent statement or statements. The extent to which they do so will, of course, be influenced by the extent of the errors or inconsistencies. (ix) As discussed above, there are in fact material inconsistencies on a number of matters between Mr Arkoudis' accounts given to the Legal Services Commissioner and his more detailed and expansive evidence in his affidavit in paragraphs [49]-[69]. (x) The account of the conversation by Mr Arkoudis in his affidavit with the plaintiffs attribute a number of statements to Mr Bakovski. They included: (xi) All of these statements would have been false as at 13 August 2004. It is implausible that Mr Bakovski would have falsely made such statements to a solicitor who was engaged in providing advice. As was submitted for the plaintiffs, there was no reason for Mr Bakovski to say these things falsely to Mr Arkoudis or for Mrs Bakovski to stand by whilst he did so. The implausibility of such statements is strengthened when regard is had to the fact that there was no basis established in evidence to suggest that Mr Bakovski had to borrow money at extremely high rates from one lender with a view to refinancing with another two months later. (xii) The inclusion, for the first time, of the statements set out in subparagraph (x) above which Mr Arkoudis attributes to Mr Bakovski go well beyond his accounts to the Legal Services Commissioner. (xiii) There is no explanation as to why, at the time of swearing his affidavit, Mr Arkoudis was able to remember many of the detailed statements set out in his affidavit that were not recorded in the letters or memorandum sent to the Legal Services Commissioner in 2010.

The matters to which I have referred in (i) to (xiii) above raise a number of difficulties concerning Mr Arkoudis and the evidence he has given.

An analysis of his evidence on the question of the advice he contended was given by him to the plaintiffs, in my assessment, leads firmly to the conclusion that his evidence on that matter is wholly unreliable. On consideration of all the evidence, including the evidence given by the plaintiffs which I accept, I am affirmatively satisfied on the probabilities that the advice Mr Arkoudis says that he gave by way of "strong" advice and warning, was not given.

As to whether Mr Arkoudis provided advice in terms required by Rule 45, I accept the evidence of the plaintiffs that the conference with Mr Arkoudis was not an hour long conference but was more likely of the order of fifteen minutes, as the plaintiffs said in evidence.

Firstly, there was no reference in the letter to the Legal Services Commissioner dated 18 May 2010 of any Rule 45 advice having been given by Mr Arkoudis.

The Legal Services Commissioner initially wrote to Mr Arkoudis on 9 March 2010: Exhibit A at p 1275-6. That letter enclosed a copy of the plaintiffs' complaint and attached documentation. The letter called for a general response to the complaint that set out Mr Arkoudis' role in the loan transaction.

A copy of the complaint documents are at Exhibit A at p 1277-1332. The complaint letter dated 12 February 2010 alleged, inter alia: "James Arkoudis failed to explain the nature of the documents they were signing and since they were unaware they were the borrowers for the loan to Mr Mitrevski they did not know that they were liable for (a) the interest on the loan, (b) if they defaulted on the loan they could lose their property at Rockdale and (c) Mr Arkoudis did not tell the Bakovskis they needed independent legal advice": (Exhibit A at p 1281).

As Mr Arkoudis had not replied to the Legal Services Commissioner's letter of 9 March 2010, the Commissioner wrote again on 23 April 2010 seeking a reply: Exhibit A at p 1333.

The reply signed by Mr Lenehan dated 18 May 2010 did not assert that advice in the Rule 45 format had been given.

Mr Arkoudis' memorandum dated 16 August 2010 (Exhibit A at p 1358), some five months after the Legal Services Commissioner's letter of 9 March 2010, asserted for the first time that, although he had made no file notes on the matter, he followed the Rule 45 format. The unreliability of Mr Arkoudis' evidence, as I have earlier determined, on the subject of the alleged "strong" advice and warning against entering the loan transaction he said he had given, is to be taken into account in assessing the reliability of his alleged advice on other issues, including the alleged Rule 45 advice.

There is no record such as an invoice or time sheet that recorded the time Mr Arkoudis spent with the plaintiffs on 13 August 2004. This further failure to maintain records by Mr Arkoudis suggests a level of informality and lack of conformity with conventional practice.

The plaintiffs' evidence was that the duration of the conference was about fifteen minutes. The circumstances in which they attended Mr Arkoudis' office without an appointment, and Mr Arkoudis' evident displeasure at being required to deal with them urgently not having received notice (see, for example, para [281]), is circumstantial evidence that tends to indicate that dealing with the plaintiffs was something he saw as an imposition on him. I accept the plaintiffs' evidence that the conference with Mr Arkoudis did not extend over an hour but was of much shorter duration.

I accept the evidence of Mrs Bakovski that the conference was a hurried one of limited duration and that there was a failure by Mr Arkoudis to provide any or sufficient advice in the terms required by Rule 45.

On the assessment of the whole of the evidence, I have concluded: (1) That the plaintiffs did not understand at the time of attending on Mr Arkoudis on 13 August 2004 that there was a proposal for them to borrow loan funds from Accom. (2) The plaintiffs' understanding was that Mr Mitrevski would be the borrower of loan monies advanced by Accom. (3) That the plaintiffs before signing the loan agreement and mortgage had not read the loan/mortgage and associated application documentation. (4) That there was no explanation provided to the plaintiffs whereby they were informed that they were entering into a loan agreement with Accom. (5) That they were not provided with legal advice upon the terms and conditions of the loan/mortgage transaction with Accom as claimed by Mr Arkoudis in his affidavit evidence. (6) In particular, I find that Mr Arkoudis did not advise the plaintiffs of the risks associated with the Accom transaction nor advise them against entering into it, or that they should seek independent financial advice and seek to renegotiate the conditions of the loan.

In light of the findings set out above, I proceed to deal with the following: (i) Whether there was a breach of duty by Mr Arkoudis; and (ii) On the issue of causation, whether or not, even if appropriate advice had been given, the plaintiffs would have proceeded with the transaction.

The issue of retainer was conceded on the pleadings. The issue of scope of duty was not.

In circumstances in which it is common ground that the terms of the loan offered by Accom were harsh and oppressive there was plainly a requirement for advice to be given to the plaintiffs by Mr Arkoudis as to both the legal effect and the risks associated with entering into the loan/security transaction. As stated in Provident Capital Ltd v Papa [2013] NSWCA 36; (2013) 84 NSWLR 231 at [75] by Macfarlan JA: "... However proper execution of a retainer to give independent legal advice concerning a loan and mortgage transaction may, depending upon the circumstances known to the solicitor, require more than an explanation of the legal effect of the documents to be executed ..."

His Honour's further observations in that case are, in my opinion, relevant to the scope of the retainer and the scope of duty of Mr Arkoudis under the retainer he had with the plaintiffs: "In my view, a reasonable solicitor in the position of Mr Caramanlis would have formed the view that Mrs Papa's home, and the business which constituted her livelihood that she conducted from it, would be significantly endangered by her entering into the transactions with Provident. A reasonable solicitor giving her independent legal advice in relation to the transactions would not in my view have failed to draw to Mrs Papa's attention, in strong terms, that her home and livelihood was dependent upon the viability and prospects of the gymnasium, especially on the ability and willingness of her son to make the loan repayments out of the income from which the business, and to recommend, again in strong terms, that she obtain financial advice, independent of her son, concerning the capacity of the business to service the loan. A solicitor's obligation is not simply to explain the legal effect of documents but to advise his or her client of the obvious practical implications of the client's entry into a transaction the subject of advice. The prospect of the subject transaction wreaking havoc on Mrs Papa's life was glaring, given the by no means remote prospect that the business would be unable to support the loan repayments." (at [80])

In the present case, it was evident that the harsh and oppressive terms on offer from Accom (as well as the short period of the loan), represented a significant risk to the plaintiffs. A solicitor retained to provide advice was bound to advise them against the transaction.

On the findings made, and discussed above, there was a breach of duty by Mr Arkoudis of the obligation to exercise reasonable care, skill and diligence in the provision of legal services to the plaintiffs. The breach represented a gross departure from the standard of care, skill and diligence required of a solicitor.

The defendants' submission was, as earlier noted, that even if appropriate advice had been given Mr and Mrs Bakovski would have ignored it and proceeded with the transaction.

In considering whether this is likely to have been the case the disposition, character and experience of the plaintiffs need to be evaluated.

The submission by Mr Finnane, as earlier noted, was that the plaintiffs, properly advised, would have been alarmed at the transaction which was proposed in their name. Reliance was placed upon the evidence that established that their working lives had been spent as wage-earners, that they had never been business people or property developers, and had never previously borrowed money on short-term high interest rates or otherwise on a high risk basis.

The question as to whether the plaintiffs would have heeded advice that pointed out the high risk of financial danger, is likely, in my opinion, to have resulted in the plaintiffs following such advice.

The likelihood that the plaintiffs probably would have accepted and followed such advice is enhanced when account is taken of their particular background and experience. Largely through income generated from their own earnings and through the exercise of a certain level of caution and astuteness, the plaintiffs managed to build up a solid residential property portfolio. There is absolutely no evidence of any risk-taking behaviour by them in the past. Additionally, the evidence indicates a consistent preparedness by them over a period of approximately twenty years to consult with and seek and obtain legal advice to guide them from their solicitor, Mr Sharpe Snr. The evidence of Mrs Bakovski strongly emphasised the trust she had in solicitors. Consultation with a solicitor in whom they could repose trust and confidence, and who took time to carefully explain and point out that no reasonable person in their position would enter into such a transaction that spelt financial trouble would, in my assessment, on the probabilities, have led them to decline to proceed with the high risk Accom loan.

The Amended Defence filed on 6 March 2013 pleaded a defence of contributory negligence: at [24]. Several particulars of the defence raised issues of failure to follow Mr Arkoudis' alleged recommendation not to enter into the transactions (sub-paragraph (c)); failure to heed his warning as specified (sub-paragraph (d)); signing documents given to them by Mr Mitrevski (sub-paragraph (e)) or at the office of the defendants (sub-paragraph (f)); signing the cheque direction (sub-paragraph (g)); and making representations as specified in sub-paragraph (h).

In light of the findings made above, plainly sub-paragraphs (c), (d), (h), and (i) do not arise.

The defendants' written submissions briefly addressed the issue of contributory negligence at [41]-[43]. Reference was there made to the provisions of s 5R of the Civil Liability Act 2002. That section is in the following terms: "(1) The principles that are applicable in determining whether a person has been negligent also apply in determining whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm. (2) For that purpose: (a) the standard of care required of the person who suffered harm is that of a reasonable person in the position of that person, and (b) the matter is to be determined on the basis of what that person knew or ought to have known at the time."

The defendants' submissions on contributory negligence relied upon the particular matters as set out in [8] of their written submissions. I have referred to such matters at [489] above. They were relied upon cumulatively as representing a significant departure from their duty to take care for their own interests.

On behalf of the plaintiffs, Mr Finnane cited and relied upon observations of the High Court in Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 at 14 [30]. I will return below to consider the principles therein stated and their application to this case.

The matters relied upon in the plaintiffs' submissions included: (1) The claimed trust placed by the plaintiffs in Mr Mitrevski and the lack of "due diligence" relied upon would have been undermined had they been properly advised, including on the need for due diligence . (2) The plaintiffs, however, were not so advised and having had no prior business or experience they had no appreciation as to the risks involved in the transaction proposed by Mr Mitrevski. (3) It was necessary for the purposes of s 5R(2) for the standard of care to be determined with reference to the plaintiffs' personal characteristics and background and the absence of proper advice. (4) On the facts of this case, the action of providing the Certificate of Title to the Rockdale property to Mr Mitrevski, a matter raised by the defendants, does not carry the significance it otherwise would where mortgage fraud is involved. All that was involved was giving effect to what the plaintiffs believed was the transaction and in that context providing it for the purposes of registration of the mortgage. (5) The signing of blank forms by the plaintiffs was not of significance. First, again the case is not one involving mortgage fraud. Second, the blank forms simply permitted applications for finance to be made. (6) The failure to make inquiries of Mr Mitrevski concerning the Malua Bay project and the terms of the loan they understood he would enter into has to be considered in the circumstances of the plaintiffs being simple people who would leave it to the solicitors to tell them what they needed to know. (7) As to the plaintiffs' failure to read documents, the plaintiffs were entitled to expect that they would have their attention drawn by the solicitor to anything they needed to read.

In determining contributory negligence a court is required to have regard to the relevant context. This requires a comparison between the lack of care of one party with the lack of care of the other and then a determination, having assessed the culpability and the causal potency of the relevant acts, of the degree of contributory negligence on the part of the plaintiff: see Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529 at 523; Ghunaim v Bart [2004] NSWCA 28 per McColl JA at [71]. As the High Court observed in Podrebersek, it is the whole of the conduct of each negligent party in relation to the circumstances of the case that must be subjected to comparative examination.

It is necessary to take into account the nature of the duty owed to a plaintiff. In Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 at 14 [30] the majority observed: "A finding of contributory negligence turns on a factual investigation of whether the plaintiff contributed to his or her own loss by failing to take reasonable care of his or her person or property. What is reasonable care depends on the circumstances of the case. In many cases, it may be proper for a plaintiff to rely on the defendant to perform its duty. But there is no absolute rule. The duties and responsibilities of the defendant are a variable factor in determining whether contributory negligence exists and, if so, to what degree. In some cases, the nature of the duty owed may exculpate the plaintiff from a claim of contributory negligence; in other cases the nature of that duty may reduce the plaintiff's share of responsibility for the damage suffered; and in yet other cases the nature of the duty may not prevent a finding that the plaintiff failed to take reasonable care for the safety of his or her person or property. Contributory negligence focuses on the conduct of the plaintiff. The duty owed by the defendant, although relevant, is one only of the many factors that must be weighed in determining whether the plaintiff has so conducted itself that it failed to take reasonable care for the safety of its person or property."

The following propositions were enunciated in Astley v Austrust Ltd, supra, in the joint judgment (Gleeson CJ, McHugh, Gummow and Hayne JJ) at 11-16: (i) At common law, contributory negligence consisted in the failure of a plaintiff to take reasonable care for the protection of his or her person or property: at [21]. (ii) Although conduct amounting to contributory negligence may constitute a breach of a duty which the plaintiff owes to the defendant, a plaintiff can be guilty of contributory negligence notwithstanding that he or she owes no duty to the defendant or any third person: at [21]. (iii) There is no rule that apportionment legislation does not operate in respect of the contributory negligence of a plaintiff where the defendant, in breach of its duty, has failed to protect the plaintiff from damage in respect of the very event that gave rise to the defendant's employment: at [29]. (iv) Contributory negligence focuses on the conduct of the plaintiff. The duty owed by the defendant, although relevant, is one only of the many factors that must be weighed in determining whether the plaintiff has so conducted itself that it failed to take reasonable care for the safety of its person or property: at [30]. (v) Courts, including the High Court, have accepted that contributory negligence can be made out in non-contractual situations, notwithstanding that the defendant was under a duty to protect people in the class of which the plaintiff was a member: at [31]. (vi) The standard of care required of a plaintiff is determined objectively by reference to what a reasonable person would have done in all the circumstances of the case: at [35].

In some cases, as the High Court observed in Astley v Austrust, it may be proper for a plaintiff to rely upon a defendant to perform its duty. The nature of the duty owed by a particular defendant, the High Court observed in that case, may exculpate the plaintiff from a claim of contributory negligence. In Astley, the plaintiff succeeded in its case against the solicitors in negligence. In the course of considering the issue of contributory negligence it was noted that Austrust had sought general advice from its solicitors about its intention to become trustee of an investment trust to be set up to establish a piggery on land in New South Wales. Having received advice, Austrust became the trustee of the trust and borrowed substantial funds to purchase the land. The trust business failed shortly after its establishment. Austrust sued the solicitors in negligence for failing to advise that it should not have accepted the office of trustee without excluding or limiting personal liability.

The finding of contributory negligence in the particular circumstances of that case is to be seen in light of the fact that the plaintiff, being a commercially sophisticated entity, had a high level of expertise available to it. The Chairman of its Board was an experienced chartered accountant and its General Manager had a background in commercial finance and it had available other qualified personnel. The trust, although required to borrow substantial funds to complete the purchase, took no steps to investigate the viability of the venture. This was an aspect for consideration in light of the fact that the scope of the solicitors' retainer, based on original instructions to Astley, was to give advice, the request for such advice having been expressed in very general terms.

Firstly, in the present case the plaintiffs were unsophisticated people. That fact must have been evident to Mr Arkoudis.

Secondly, the plaintiffs had not sighted the loan and security documents as they were sent directly to Lenehan & Co.

Thirdly, there is no suggestion that Mr Arkoudis suggested that they should read those documents. In the time available, I find that they did not.

Fourthly, Mr Bakovski had a very limited ability to read printed English language, whilst Mrs Bakovski, although having the capacity to read English, had the limitations noted above.

Fifthly, there is no evidence that before the plaintiffs saw Mr Arkoudis that they were on notice of what proposal Mr Mitrevski had discussed and agreed upon with the broker, ProPex, or with Accom.

Sixthly, the plaintiffs placed their interests concerning the loan transaction with Accom with Mr Arkoudis.

Seventhly, the plaintiffs had no experience of short term lending.

Eighthly, upon findings I have earlier made, the plaintiffs did not have an adequate or full understanding of the transaction with Accom before signing the relevant contract and had developed an understanding that Mr Mitrevski was borrowing the funds and that they were the secured guarantors.

Ninthly, Mr Arkoudis failed to advise the plaintiffs in the respects set out in my findings on primary liability.

The plaintiffs, unlike in Astley v Austrust Ltd, were neither sophisticated nor well-informed people with ready access to relevant information in the hurried circumstances they found themselves in on 13 August 2004.

On the findings made above, it is plain that the plaintiffs required advice - strong advice - from a legal practitioner of the kind discussed above.

The solicitor in this case, Mr Arkoudis, was retained and paid to not only explain the proposed transaction, but to give the particular advice against entering into the transaction to which I have referred above. In that sense, he was in what might be termed a "gatekeeper" role in the protection of his clients' interests.

The culpability and causal potency of the first defendant's breach of duty was, on the findings made, at a high level.

Fulfilment of Mr Arkoudis' duty to exercise care, skill and diligence, would, on the findings made and recorded above, have in all likelihood had the effect that the plaintiffs would not have proceeded with the Accom loan.

On a factual investigation, the High Court in Astley v Austrust Ltd established that the plaintiffs were entitled to rely upon the first defendant to perform his duty to properly advise them. That was the specific and only purpose in them retaining him.

On the facts and circumstances established in evidence, in my assessment, this is a case referred to in Astley v Austrust Ltd where "the nature of the duty owed may exculpate the plaintiff from a claim in contributory negligence" being a case where the clients retaining the solicitor, not being sophisticated, required clear and strong advice.

I am accordingly of the opinion that the defendants have not established the defence of contributory negligence pleaded in the Amended Defence.

Part 4 of the Civil Liability Act 2002 creates a proportionate liability scheme. It is necessary to refer to certain key provisions.

Section 34 provides: "(1) This Part applies to the following claims (apportionable claims): (a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury, (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act (as in force before its repeal by the Fair Trading Amendment (Australian Consumer Law) Act 2010) or under the Australian Consumer Law (NSW) for a contravention of section 18 of that Law. (1A) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (2) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. (3) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1). (3A) This Part does not apply to a claim in an action for damages arising from a breach of statutory warranty under Part 2C of the Home Building Act 1989 and brought by a person having the benefit of the statutory warranty. (4) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died."

Section 35 provides: "(1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount. (2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim: (a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part, and (b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant. (3) In apportioning responsibility between defendants in the proceedings: (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law, and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings. (5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise."

Part 4 is concerned with a particular sub-class of claims in actions for damages arising from a failure to exercise reasonable care, being those claims that consist of claims "for economic loss or damage to property" which do not arise out of personal injury.

In the present case, the plaintiffs' claims are clearly claims for "economic loss" in an action for damages. A central question is whether Mr Mitrevski is a "concurrent wrongdoer". That raises a threshold question a to whether the plaintiffs' claim against the defendants is an "apportionable claim" within s 34(1). If that is answered affirmatively, then a determination is required to be made in respect of an appropriate apportionment as required by s 35(1).

In identifying "concurrent wrongdoers" the central concept is that of a single apportionable claim, which directs attention to claims in respect of the same loss or damage even if the claims are based on more than one cause of action: (s 34(1)(a)): Perpetual Trustee Company Limited v Ishak [2012] NSWSC 697 per Brereton J at [191].

Accordingly, there is a necessity for there to be an identification of the particular loss or damage said to be the subject of a single apportionable claim.

I turn, firstly, to deal with the issue as to whether the plaintiffs' claim is apportionable under Part 4 of the Civil Liability Act.

The starting point is the definition of a "concurrent wrongdoer" within s 34(2) of the Act which provides: "In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim."

This provision, in the context of the proportionate liability provisions in Part 4, were recently the subject of the High Court's decision in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613.

As French CJ and Hayne and Kiefel JJ observed at [16], where the defendant can show that he or she is a "concurrent wrongdoer", whether jointly with the defendant acts or independently of them, the court has the task of apportioning responsibility. If there are other wrongdoers, they, together with the defendant, are all concurrent wrongdoers.

Their Honours further observed that s 34(2) poses two questions for the court: What is the damage or loss that is the subject of the claim? Is there a person, other than the defendant, whose acts or omissions also caused the damage or loss?

The majority of the High Court further considered the issue of causation arising under Part 4. The proper identification of damage should usually point the way to the acts or omissions which were its cause. Causation is largely a question of fact, to be approached by applying commonsense to the facts of the particular case: at [43].

Additionally, it was observed that the word "caused", in the statutory provision in terms similar to s 34(2), has been read as connoting the legal liability of a wrongdoer to the plaintiff and that it would usually be the case that a person who is found to have caused another's loss or damage is liable for it. References to the liability of a wrongdoer should not, however, distract attention from the essential nature of the inquiry, which is one of fact: at [47]. "In determining the question of causation, it is necessary to keep clearly in mind the harm suffered by Mitchell Morgan: its inability to recover the monies advanced. Merely to then state the obvious facts - that the monies were advanced under the loan agreement and on the security of the mortgage - is to acknowledge that the harm suffered has more than one cause." (at [48])

Their Honours further observed at [53] that it is not a requirement of proportionate liability that the actions of one independent concurrent wrongdoer contributed to the negligence of another. The question is whether each of them, separately, materially contributed to the loss or damage suffered.

In the present proceedings, the economic loss or damage claimed by the plaintiffs may be seen to result from two causes. The first is the contractual liability arising under a loan on oppressive and harsh terms and the plaintiffs' obligations to repay the loan monies to Accom. The second is both the acts of Mr Mitrevski in inducing them to assist him obtain funds by a loan of monies from Accom, and the failure by Mr Mitrevski to, in effect, indemnify the plaintiffs against any such liability contrary to the representation he is said to have made in that respect: see Mrs Bakovski's affidavit at [66].

I have considered whether there is any possible basis upon which the economic loss or damage claimed by the plaintiffs may be said to be a different loss or damage resulting from a representation and/or inducement by Mr Mitrevski to the plaintiffs to enter into the loan and his failure to honour any such representation. In certain circumstances, a loss arising from misrepresentation may arguably be said to be a different loss rather than the same loss or damage incurred by a borrower for a failure to repay a loan. See, for example, Kayteal Pty Ltd v Dignan [2011] NSWSC 197 at [67].

However, in the present case, the plaintiffs' contractual liability to repay loan monies to Accom may be said to have resulted from the two causes to which I have referred above.

As discussed below, I consider that there is sufficient evidence for the conclusion that Mr Mitrevski was a concurrent wrongdoer having made material misrepresentations to the plaintiffs which induced them to agree to assist him obtain short term finance from Accom.

Accordingly, I have concluded that the plaintiffs' claim is an apportionable claim under Part 4 of the Civil Liability Act.

In those circumstances I am required by the provisions of Part 4 to determine the proportion of the damage or loss claimed that the court considers just having regard to the extent of the first and second defendants' responsibility for the damage or loss.

It was submitted for the defendants that the respective proportions of liability will depend upon the Court's view as to "... the relative moral delinquency and causal potency of Mitrevski's and Arkoudis's respective legal wrongdoings": Defendants' Outline of Submissions at [44].

It was further submitted that the evidence established that had Mr Mitrevski not told the plaintiffs that he had a substantial development with a number of past sales, and expected future sales that would fund the repayment, they would not have borrowed the funds or secured a loan to Mr Mitrevski: at [46].

It was observed that, although there is no "tariff" and each case turns on its facts, the decisions in Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 at [591]; Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60 and Chandra v Perpetual Trustees Victoria Limited [2007] NSWSC 694 are decisions that indicate a substantial proportion should be allocated to the deliberate wrongdoer as opposed to the negligent wrongdoer.

In the plaintiffs' submissions on proportionate liability it was stated that the defendants needed to establish liability on the part of the alleged concurrent wrongdoer, namely, Mr Mitrevski and this had not been addressed in the defendants' submissions in chief.

Reference was made to the authorities which establish that a respondent calling in aid the benefit of the proportionate liability provisions has the onus of proving the required elements: Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216 at [31]; Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 at [32].

A concurrent wrongdoer, it was observed, must not only have caused the loss or damage, but also have a legal liability for that loss: Plaintiffs' Submissions at [56].

In the present case, the pleaded cause of action by the plaintiffs involving Mr Mitrevski was one for misleading or deceptive conduct. There were three alleged misrepresentations in that regard: (a) That Mr Mitrevski "was engaged in the Mitrevski Developments which he needed to finish before he could purchase the plaintiffs' properties". (b) That Mr Mitrevski represented to the plaintiffs "that, if the said loan was taken out, he would owe legal obligations to the lender as borrower, co-borrower, guarantor, co-guarantor and/or as a mortgagor, or would provide real property security ... for the loan". (c) That Mr Mitrevski was silent after making the representation in (b).

It was submitted in relation to (a) that the defendants' case was that there was no development or building works in Malua Bay or that Mr Mitrevski was not involved in them. The defendants relied upon documents which indicated that a development approval had been given for a substantial subdivision in Malua Bay in 1997, that a joint venture agreement involving Mr Mitrevski was in operation, as of at least 12 May 2003, and that an application had been made to vary the development application and to obtain further additional subdivisions on 12 May 2003. See Exhibit 2, Malua Bay Documents.

It was also noted that the documents establish that Mr Mitrevski consented to the submission of a building application and development application on 15 January 2004. Further, on 27 August 2004 a Mr Pritchett stated that he had a conversation with Mr Mitrevski at some stage before that date as to his, Mr Mitrevski's, desire to subdivide the Malua Bay land into smaller lots.

Subsequently, on 22 October 2004, an application for modification of consent was lodged in relation to the development. There was then further correspondence with the council after this time relating to the development.

It was submitted that the defendants had failed to disprove the existence of the development or that Mr Mitrevski was engaged in it.

In relation to (b) it was submitted that the defendants' case was based upon evidence given by Mr Bakovski in his first affidavit at [42] and Mrs Bakovski's evidence in her affidavit at [66]. However, it was submitted that no representations were made by Mr Mitrevski as to the contents or meaning of loan documents and that no mention of Mr Mitrevski giving security for the loan was established.

As to (c) it was submitted that the alleged representation could not be made out. Even if Mr Mitrevski did engage in misleading or deceptive conduct, the defendants, it was submitted, needed to establish that the conduct led to recoverable loss or damage and that such loss or damage was the subject of the plaintiffs' claim against the defendants. This had not been addressed in the defendants' submissions.

In the event that an entitlement to apportionment could be established by the defendants, it was submitted that the court needed to consider what was "just" having regard to the extent of the defendants' responsibility for the damage or loss in accordance with the requirements of: s 35.

The cases relied upon by the defendants, to which reference has been made above, were said to be distinguishable from the present case. Those cases, it was observed, were different as they were all cases where a person, other than a solicitor, had engaged in forgery.

In the present case, the following matters were relied upon in the plaintiffs' submissions: "a) The solicitor's level of delinquency is great, as he failed completely in his basic duty to advise the clients; and b) Mr Mitrevski's level of delinquency is not comparable to that of forgers. He did not, in connection with the Accom transaction, forge signatures. He sought some assistance, and in connection with that he made some representations (assuming the defence in this regard is made out). c) Mr Mitrevski's culpability in connection with the "Mitrevski Development" is similar to that of a borrower who overstates his financial position in order to persuade a bank to lend money. d) Mr Mitrevski's culpability in relation to the structure of the transaction and whether Mr and Mrs Bakovski would be principal borrowers is low or nil. First, even if the representation had been true, it would not have made the transaction any more favourable for Mr and Mrs Bakovski. Second, it is not clear that Mr Mitrevski ever knew his representations in this regard to be, or to have become, false. Third, before the transaction was entered into, Mr Mitrevski knew that Mr and Mrs Bakovski would be seeing a solicitor, and it was reasonable for him to assume that the solicitor would give them advice about the nature and effect of the documents before they signed them." (Plaintiffs' Submissions in Reply at [67])

It was submitted for the plaintiffs that the greater part of the loss should be apportioned to the defendants.

The provisions of Part 4 represent a significant departure from the previous regime of "solidarity liability" at common law under which liability could be joint or several but each wrongdoer could nonetheless be treated as an effective cause and be required to bear the whole loss. Under that regime a plaintiff was able to sue one wrongdoer and recover the whole loss for that wrongdoer, thus leaving that tortfeasor to seek contribution from any other wrongdoers.

The provisions of Part 4, however, are intended to visit on each concurrent wrongdoer only that amount of liability which the Court considers "just", having regard to the comparative responsibilities of all wrongdoers for the plaintiff's loss: Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 per Palmer J at [93]-[94].

There have been a number of decisions on the provisions under Part 4 and their application. They include: Kayteal Pty Ltd v Dignan [2011] NSWSC 197; Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697; Chandra v Perpetual Trustee Victoria Ltd [2007] NSWSC 694; Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187, and recently, Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613.

In George v Webb [2011] NSWSC 1608 the claim related to money disbursed out of a trust account maintained by a firm of solicitors, Grogan Webb, otherwise than for the purpose for which the plaintiff, Mrs George, contended those monies were to be paid.

The plaintiff's contention was that the monies ($150,000) were to be placed into the solicitors' trust account upon terms that the monies were to be held on trust for her and used for the purposes of an investment referred to as to Elderslie/Allco HIT acquisition and were to be distributed at the direction of a Mr Burke.

Mr George and Mr Burke had been involved in discussions concerning a proposed acquisition by a consortium co-ordinated by Mr Burke of assets of certain companies then in receivership or administration.

There was a dispute as to the agreement they reached. Following the agreement, the monies were transferred into the Grogan Webb's trust account.

Grogan Webb had acted for Mr Burke and his companies for many years. The day after the funds were placed into the trust account, Mr Burke authorised their distribution to various entities and for various purposes (the bulk of expenditure being for payment of school fees for Mr George and the balance for fees of Grogan Webb and another debt of Mr Burke).

The principal claim was for breach of trust, or alternatively, a claim in negligence. Ward J (as her Honour then was) held that Grogan Webb breached the trust by paying out the $150,000 and was liable to return to Mr George that amount plus interest.

Although it was not therefore necessary for the issue of proportionate liability to be determined, her Honour stated as follows: "Had the issue of apportionment arisen (and noting that, as an excluded wrongdoer in light of the conduct I have found on his part in intentionally causing the loss to be suffered, Mr Burke would be liable for the whole of the loss without any reduction), I would have balanced on the one hand the fact that had it not been for the payment out by Grogan Webb the direction of Mr Burke would have caused no loss (and thus the final point at which the loss could have been avoided was the point at which Grogan Webb bears ultimate responsibility) and that if one looks at the standard of care expected of a trustee, the failure to make enquiries when a direction so obviously outside the expressly stated purpose was received seems to be a not insignificant departure against the fact, on the other hand, that Mr Burke appears to have been the architect of the arrangements pursuant to which the funds were distributed contrary to the intent of Mrs George and that he obtained the benefit of the distribution of the funds (though Grogan Webb also did to an extent in the sense that the claim against Mr Burke for fees was thereby discharged, in circumstances where they knew he was otherwise short of funds). Recognising that this is largely a discretionary judgment and balancing those factors, in the end I would have held that the proportionate liability to be borne by Grogan Webb was 60%." (at [332])

In relation to the action for breach of fiduciary duty, I note the reasons of Ward J in George v Webb in which her Honour observed that an "action for damages", as required under s 34(1) of the Civil Liability Act, encompasses a claim for equitable compensation where the claim is one "arising from a failure to take reasonable care" and in proceedings in which the claim has been predicated on, or arising from, such a failure. Her Honour proceeded to conclude that: "In my view, irrespective of the fact that the failure to take reasonable care may have contributed to or been the underlying cause of the conduct that amounted to the relevant breach of trust, the principal liability here is a liability for breach of trust by the payment out of the funds other than in accordance with the express purpose trust on which they were held. This breach of trust would have occurred (and the liability arises) whether or not there had been a failure on the part of the solicitors to take sufficient care in complying with the directions that were given to them. Therefore I consider that the liability, as found, is not one predicated on or arising from a failure to take reasonable care and this is not an apportionable claim..." (at [325])

The relevant principles regarding the apportioning of liability, particularly where fraudsters are involved, were summarised by Brereton J in Perpetual Trustee Company Ltd v Ishak, supra.

When assessing the appropriate contribution under the proportionate liability legislation a matter that may be taken into account is whether the wrongdoer has profited from his actions which caused the loss.

I am satisfied on the evidence, including the evidence of the plaintiffs, that Mr Mitrevski induced the plaintiffs to enter into the Accom transaction on the basis that he would be responsible for all interest and expenses and for the repayment of the loan monies, and that such monies would be applied towards completing his Malua Bay development. In that respect, I find that the defendants have established that Mr Mitrevski was a concurrent wrongdoer within the meaning of the provisions of Part 4 of the Act and that, accordingly, the claim is an apportionable claim. The misrepresentations by him would constitute misleading and deceptive conduct and hence a breach of s 42 of the Fair Trading Act.

Whilst there is evidence that Mr Mitrevski had been involved in the proposed development of land at Malua Bay, contrary to his representations, the development had not reached the construction stage represented by him, or indeed that construction had in fact commenced. I find that his representations were calculated to induce the plaintiffs to meet his request that they assist him in obtaining finance to assist him in completing the development.

The defendants, as noted above, bear the onus of pleading and proving the apportionment required to be made under Part 4. Although Mr Mitrevski misrepresented the position, as I have stated, to the plaintiffs, there is no evidence from which a finding could be made that at that time he intended to defraud the plaintiffs as against having acted negligently or even recklessly or that he intended to misappropriate the loan monies: Briginshaw v Briginshaw (1938) 60 CLR 336.

I bear in mind that, at an earlier stage, prior to the Accom loan, Mr Mitrevski had in fact paid monies to the plaintiffs amounting in all to $100,000, in effect, on account of a "deposit" towards a future purchase of the Belmont properties. Such conduct by Mr Mitrevski is some evidence that may point against an earlier dishonest intent at the time the loan request was made by him it being the type of conduct, of course, that is absent in the mortgage fraud cases relied upon by the defendants.

That said, the evidence does, as I have indicated, support a finding of misleading and deceptive conduct by Mr Mitrevski, being conduct that involved a significant level of culpability and, in the circumstances contributed to the Accom loan being entered into by the plaintiffs. I am satisfied that the loan monies were utilised in ways unknown but from which it may be inferred that he benefited from receipt of the monies.

In relation to Mr Arkoudis, on the findings made, the breach of duty by him represented a gross departure from his duty of care as a solicitor retained to give independent advice to the plaintiffs. As the findings earlier made indicate, he was aware of the fact that the transaction for which the plaintiffs were consulting him was an unusual one. Indeed it must be taken that he was aware of the fact that the terms of the proposed loan were both harsh and oppressive.

The evidence establishes that the execution of the loan transaction was being pursued urgently without, on the findings I have made, any apparent need for the plaintiffs to rush into the transaction. It must be taken to have been apparent that given the oppressive and harsh terms for the proposed loan and possible language difficulties affecting Mr Bakovski, the need for the plaintiffs to proceed with great caution was essential.

On the findings made, there were no circumstances that could justify the failure of Mr Arkoudis to have brought home to the plaintiffs by strong advice that the proposed loan transaction represented an extremely high level of financial danger or risk to them.

This is a case in which the solicitor's duty of care was critical to the making of the loan/mortgage contract. Properly discharged by Mr Arkoudis, the transaction, on the findings I have made, would never have eventuated. This is a case far removed from a solicitor's failure to draft a mortgage with necessary terms as in Hunt v Hunt Lawyers v Mitchell Morgan, supra. The breach of duty of care by the solicitor in this case reached well beyond the omission or failure in that case - it was a primary and potent cause of the plaintiffs' loss and represented, as earlier stated, a serious departure from the standard of reasonable care, skill and diligence required.

I have determined that the proportionate liability of the concurrent wrongdoer Mr Mitrevski to be 60% and that of the first and second defendants to be 40%.

There remains the question as to the loss and damage that is alleged to have been caused by the breach of duty in this case.

The plaintiffs' damages claim comprises the following: The plaintiffs' alternative claim for interest is claimed at the pre-judgment interest rate under s 100 of the Civil Liability Act 2002 in respect of the sum of $30,244.68.

The plaintiffs claim interest on the amount of damages referred to above from 10 December 2004.

It was submitted that the incurring of interest was caused by the defendants' negligence, and that the interest is not too remote to be recoverable as part of the plaintiffs' damages.

In support of their claim for compound interest, the plaintiffs relied upon Hungerfords v Walker (1988) 171 CLR 125 at 145-146: "The cost of borrowing money to replace money paid away or withheld, in consequence of the defendant's breach of contract or negligence, is directly related to the wrong and is not too remote in the sense in which the common law regarded the loss attributable to late payment of damages as being too remote."

Such interest "is an expense which represents loss or damage flowing naturally and directly from the defendant's wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money": at 143-144.

Accordingly, Brennan and Deane JJ found: "There is, in our view, a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired. On the one hand, there is no common law power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the court assesses to be the appropriate measure of damages for a wrongful act. If such interest is to be awarded at common law, it must be pursuant to statutory authority. On the other hand, there is no acceptable reason why the ordinary principles governing the recovery of common law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money. To the extent that the reported cases support the proposition that damages cannot be awarded as compensation for the loss of the use of a specific sum of money which the wrongful act of a defendant has caused to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed." (at 152)

The plaintiffs claim compound interest for the period from 10 December 2004. The plaintiffs claimed the sum of $1,569,000.73 as at 15 April 2013, and interest thereafter until judgment compounding monthly at a rate of 16.41% per annum.

I note that the defendants agreed with the plaintiffs' mathematical calculations as to compound interest, but not the plaintiffs' entitlement to claim compound interest.

The plaintiffs' claim for compound interest arises from the interest expenses incurred by the plaintiffs under their various loan agreements.

In respect of Liberty Financial, the plaintiffs received an advance from Liberty Financial in the sum of $1,825,000.00 on 10 December 2004. As this advance also related to amounts other than the Accom loan, the plaintiffs only claim the amount that directly relates to the Accom loan, being 31.67% of the Liberty Financial advance.

Until September 2008, the plaintiffs' interest expenses under the various loan advances were met by way of prepayments out of loan advances and refinancing.

Since September 2008, the plaintiffs' interest expenses have not been met and have compounded monthly at a rate of 16.41% per annum.

The plaintiffs' claim for compound interest is explained in paragraphs [116]-[133] of their abovementioned written submissions. The basis for the claim being in the interest they have paid since 10 December 2004 under the Accom loan and under "roll-over" loans with Crown & Gleeson, refinanced with Liberty Financial and then refinanced with Advance/Eurofinance as detailed in the written submissions and quantified in the plaintiffs' schedule of damages and interest.

I do not here reproduce paragraphs [118]-[133] of those submissions. However, the matters specified in those paragraphs were summarised in [134]-[137] of the submissions as follows: "134. In summary: a) the plaintiffs, having incurred a liability to Accom Finance and Crown & Gleeson, refinanced it with Liberty Finance [sic], and then refinanced that further finance with Advance / Eurofinance. b) In connection with their loans, the plaintiffs incurred interest expenses. c) Until September 2008, the interest expenses were met by way of prepayments out of loan advances (made in December 2004, 2005 and 2006, and then in September 2007 when the Liberty loans were refinanced with Advance and Eurofinance). d) Since September 2008 the interest expenses have not been met, and have compounded monthly at a rate of 16.41% pa. e) The Belmont Properties are in the possession of Eurofinance and have not been sold. f) The two investment properties in Rockdale have been sold, and the proceeds applied to the Eurofinance debt, but a substantial amount remains owing and interest continues to be accrued. 135. There is no suggestion that the plaintiffs had some funds available to them with which they could have paid Accom Finance in December 2004, and then the subsequent lenders. Rather, the evidence is of the plaintiffs together with Mr Hastie taking urgent steps to obtain settlement figures and pay out Accom and Crown & Gleeson. In any event, it should readily be inferred, from the fact that the plaintiffs borrowed the money, that they needed to do so. 136. It is submitted that the incurring of the interest was caused by the defendants' negligence, and that the interest is not too remote to be recoverable as part of the plaintiffs' damages. 137. In the alternative, the plaintiffs should be awarded interest calculated at the pre-judgment interest rate under s 100 of the Civil Procedure Act 2005."

In the Defendants' Schedule of Damages and Interest, a calculation is provided in respect of pre-judgment interest under s 100, calculated as simple interest. On the defendants' calculations (which the plaintiffs agree to only in respect of the mathematical calculations), the total interest amount up to 15 April 2013 is $400,366.25 (assuming the plaintiffs' total loss or damage is $525,979.44). This was calculated as follows:

The plaintiffs claim 31.67% of the costs of the recovery steps against Mr Mitrevski, representing a sum of $30,244.68.

The defendants dispute the claimed amount of $608,196.02, instead submitting that if it is found that the defendants' conduct caused the plaintiffs to suffer loss or damage, such loss or damage is limited to the amount of $525,979.44. That amount comprises the initial sum advanced by Accom, accrued interest required to discharge the Accom loan, and fees owed to Bransgroves in respect of the discharge of mortgage. Accordingly, the defendants dispute the damages claimed in respect of Liberty Financial and the recovery proceedings against Mr Mitrevski.

The liability under the Crown & Gleeson loan and subsequent thereto by reason of the abovementioned refinancing arrangements was, as the plaintiffs' submissions acknowledge attributable only to 31%, representing the "Accom loss". Therefore the balance of the liability (69%) arose principally due to the original "post-Accom" loan that was taken out by the plaintiffs with Crown & Gleeson, subsequently refinanced as stated above.

Accordingly, the plaintiffs' substantial ongoing liability to pay interest, as to 69% of the total interest liability, that is 69% stemming from the original Crown & Gleeson loan, constituted a significant reason for the unfortunate situation the plaintiffs found themselves in. That is an important factor to be taken into account on the claim for compound interest. Their heavy debt-burden in other words stemming to a large extent from the Crown & Gleeson loan limited their capacity to pay their way out of their situation, hence the multiple refinancing of their total indebtedness.

I do not, accordingly, consider that in the circumstances of this case a proper basis exists for awarding compound interest as claimed.

I have considered the basis for the calculation of interest, firstly, in terms of the amount upon which interest is to be allowed, namely in the amount of $608,196.02 as calculated and contended for by the plaintiffs, or the amount of $525,979.44 as calculated by the defendants. The difference of $82,216.58 arises from the items referred to above as the Liberty Financial expenses and interest and the plaintiffs' legal costs in respect of recovery against Mr Mitrevski.

The plaintiffs, due in part to the short term of the Accom loan (two months) and the possession proceedings commenced by Accom, were obliged to refinance their loan with Accom. The refinancing was done through Liberty Financial, which required pre-payment of 12 months' interest.

I have concluded, firstly, that the expenses relating to Liberty Financial, including pre-payment of interest, arose directly from the circumstances arising by reason of the Accom loan having been entered into and, as such, are recoverable: Hungerfords v Walker, supra, at 145-146.

I have separately considered the level of interest charged by Liberty Financial totalling $49,128.09 for the first 12 months of the loan. The rate was somewhat higher than the prescribed rate under the Uniform Civil Procedure Rules, but not by an excessive margin. I consider that in the circumstances that resulted from the Accom loan, including the possession proceedings that were instituted against the plaintiffs, the interest and expenses incurred, as claimed, should be allowed as consequential and recoverable loss.

The principles that determine recoverability of damages for expenses incurred or recovery of opportunity cost are well-established. (1) The fundamental principle is that a plaintiff who has suffered loss or damage by reason of the wrongful act of another is entitled to restitutio in integrum. (2) According to that principle, a plaintiff is entitled to full compensation for the loss which he/she sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and the plaintiff's duty to mitigate is/her loss. (3) A plaintiff's economic loss may, inter alia, arise in the form of the borrowing cost of money, that is, interest payable on borrowed money or interest foregone because an existing investment is realised or reduced. (4) The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates for the loss of use of money. (5) Accordingly, both opportunity cost and incurred expense is a plainly foreseeable loss. (6) The cost of borrowing money to avoid a loss caused by a breach of contract is recoverable and not too remote.

The High Court in Hungerfords v Walker (1988) 171 CLR 125 at 142-145 reviewed this development of the law in relation to the above principles. Mason CJ and Wilson J in that case observed (at p 145): "The cost of borrowing money to replace money paid away or withheld, in consequence of the defendant's breach of contract or negligence is directly related to the wrong and is not too remote in the sense in which the common law regarded the loss attributable to late payment of damages as being too remote ..."

In Hungerfords v Walker it was held that s 30C of the Supreme Court Act 1935 (SA) (which conferred a power to award interest on damages) did not foreclose the authority of the courts to award damages in accordance with the principle established in Hadley v Baxendale and the measure of damages governing claims in tort.

The Court referring to the broad approach Equity adopted in awarding interest noted that courts of equity had awarded not only simple interest but also compound interest when justice demanded, for example, money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary (at p 148).

In Hungerfords v Walker the High Court noted that the respondent's damage was within the reasonable contemplation of the parties and had they had the money lost they would have used it to pay down high interest loans of the business (20%).

Damages were properly awarded by way of compound interest for the added cost of funding the business with borrowed money as a result of the loss of the use of the money overpaid in tax.

I have concluded that the plaintiffs are entitled to an order for interest under s 100.

Under s 100, the Court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the Court thinks fit on the whole or any part of the money, and for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.

As the award of damages will not include an award of compound interest, then the appropriate order is that the plaintiff is entitled to an award of interest at the prescribed rates in accordance with the Uniform Civil Procedure Rules, Civil Procedure Act, and applicable Practice Notes for the whole of the period calculated from 10 December 2004 to the date of judgment.

On the latter basis, the calculation of interest at the prescribed rates on the total sum referred to above, namely, $608,196.02, is as follows:

On the basis of the above conclusions on apportionment, damages are to be awarded as to 40% of the amount of $608,196.02 (namely, $243,278.41), together with interest calculated on that amount. On my calculations, as set out below, the interest amount is $201,234.57.

I propose to permit the parties the opportunity to make submissions on the calculation of the judgment amount, including pre-judgment interest, to be awarded on the above bases.

I will hear submissions as to costs.

The proceedings will be re-listed in relation to the outstanding issues of pre-judgment interest and the making of final orders.