Aksu v Hussain [2003] NSWCA 26 (18 February 2003)

Last Updated: 19 February 2003

NEW SOUTH WALES COURT OF APPEAL

CITATION: Aksu v Hussain [2003] NSWCA 26

FILE NUMBER(S):

40530/01

HEARING DATE(S): 3 October 2002

JUDGMENT DATE: 18/02/2003

PARTIES:

Huseyin Aksu & Anor

v

Fahmi Hussain, Mark Williams & Brian Davidson trading as Williams Hussain Davidson

JUDGMENT OF: Handley JA Beazley JA Giles JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 9813/99

LOWER COURT JUDICIAL OFFICER: Puckeridge DCJ

COUNSEL:

Appellant - C K Stewart/N Potts

Respondent - J Oakley

SOLICITORS:

Appellant - Dennis & Company

Respondent - Ebsworth & Ebsworth

CATCHWORDS:

LEGAL PRACTITIONERS - retainer - negligence - no question of principle

LEGISLATION CITED:

DECISION:

Appeal dismissed with costs

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

40530/01

DC 9813/99

HANDLEY JA

BEAZLEY JA

GILES JA

18 February 2003

HUSEYIN AKSU & ANOR v FAHMI HUSSAIN & ORS

(TRADING AS WILLIAMS HUSSAIN DAVIDSON)

Judgment

1 HANDLEY JA: This is an appeal by the plaintiff, Mr Huseyin Aksu, against the judgment for the first defendant entered by Puckeridge DCJ in an action for professional negligence.

2 The following summary is based on undisputed facts or the solicitor's evidence. Prior to February 1994 Mr Fahmi Hussain (the solicitor), a partner in the first defendant (the firm), had acted for the plaintiff on a number of occasions. The plaintiff met him in the street in the Auburn shopping centre on a Friday in February 1994 and said that he wanted to see him urgently (83). The solicitor couldn't see the plaintiff that day and they arranged to meet the next day in the solicitor's office.

3 The plaintiff arrived with the second defendant and her brother. He had agreed to make a loan of $120,000 to the second defendant for 12 months to help finance a business venture she had with her brother in Queensland. They wanted the solicitor to prepare an agreement or letter before the brother returned to Queensland which would confirm the plaintiff's intention of lending the money to the second defendant (83-4, 90).

4 The solicitor said that he would prepare a document and the parties returned on the Monday to sign it. Only two copies were made and one was taken by the plaintiff and the other by the second defendant's brother. In September 1994 the plaintiff borrowed $120,000 from the Advance Bank on the security of a property of his in Queensland and lent the funds to the second defendant without security.

5 The second defendant's business venture failed. She kept up payments of principal and interest under the plaintiff's mortgage for a time but eventually defaulted. In 1999 the plaintiff sued the firm for professional negligence and the second defendant for debt. The action as against the second defendant did not proceed because she became bankrupt. The action went to trial against the firm but the trial Judge in an extempore judgment found in their favour.

6 The plaintiff's wife had also been joined as a plaintiff but no evidence was led to support her claim and after the plaintiff's counsel closed his case judgment was entered for the firm. She was joined as an appellant in the appeal but no submissions were made on her behalf.

7 The conduct of the trial and the reasons for judgment of the trial Judge make it necessary to refer to the pleadings in more detail than usual. The relevant paragraphs of the statement of claim were as follows:

"6. In or about February 1994 the Plaintiffs retained the First Defendants to prepare documentation in relation to the money they were to lend to the Second Defendant. The First Defendants negligently advised the Plaintiffs to enter into the loan and represented the Second Defendant was a person who would be able to make payments on the said debt and was to be trusted (sic). The First Defendants did not suggest to the Plaintiffs that they obtain independent or separate legal advice or independent or separate commercial advice.

7. The Plaintiffs made application and obtained the loan from Advance Bank and advanced money to the Second Defendant on the premises represented to them by the First Defendants and relied thereon.

8. The Plaintiffs would not have entered into the loan if they had been properly advised by the First Defendants as to the risks of entering into the transaction and they were induced by and acted in reliance upon the First Defendants' representations.

9. The First Defendants did not properly document the arrangements between the Plaintiffs and the Second Defendant".

8 The firm's grounds of defence admitted (par 4(a)) that the plaintiff retained them to prepare a document setting out the terms of an agreement between the plaintiff and the second defendant, and they did not suggest to the plaintiff that he obtain independent advice, but they denied giving the advice or making the representation alleged in par 6 of the statement of claim. The remaining allegations were either not admitted or denied.

9 There was no evidence to support the allegation in par 6 that the solicitor represented that the second defendant would be able to make the payments on the debt and was to be trusted and no ground of appeal was directed to that question. Thus the substance of the case against the firm was that the solicitor did not advise the plaintiff to take security before lending the money to the second defendant and failed to prepare the necessary securities.

10 The Judge held that there was no evidence to support the allegation in par 6 that the solicitor advised the plaintiff to enter into the loan. The plaintiff gave evidence that he sought the solicitor's advice in respect of the proposed loan but the Judge held there was no evidence that the solicitor gave such advice. These findings were not challenged in the grounds of appeal.

11 The allegation that the solicitor failed to suggest to the plaintiff that he obtain independent advice was admitted on the pleadings, but the Judge found that the solicitor did not have to tell his own client to obtain separate or independent legal advice. This finding was challenged in ground 5 of the notice of appeal.

12 The second defendant, who was called in the plaintiff's case, did not claim to have been a client of the solicitor before meeting him with the plaintiff. The solicitor denied any prior professional association with her, but she may have been a joint client with the plaintiff for the purpose of having their agreement documented.

13 The Judge said that "it has not been made clear ... that there was any need for any separate legal advice" to be given to the plaintiff. The solicitor said that he was asked to prepare a document confirming the plaintiff's intention of lending money to the second defendant and that was all he was required to do. At that stage therefore there was no conflict of interest although the Judge recognised that there could have been a conflict later on if security documents had to be signed. Ground 5, which therefore alleged error in the finding that the solicitor did not have to advise his client, the plaintiff, to obtain independent advice, has not been made out.

14 The plaintiff, the solicitor and the second defendant were the only persons to give oral evidence. The Judge made an express finding about the credibility of the second defendant saying he was not impressed by her evidence. He made no express findings about the plaintiff or the solicitor but on a fair reading of his reasons he preferred the evidence of the solicitor and there is an implicit finding to that effect. Indeed ground 3 of the notice of appeal was that the Judge had failed to give reasons for preferring the solicitor's evidence to that of the plaintiff and ground 6 was that the Judge erred in not accepting the plaintiff's evidence.

15 The appeal must therefore be determined on the basis that the Judge accepted the evidence of the solicitor or at least those parts of it that he referred to in his reasons for judgment. On this basis he found that the solicitor was approached by the plaintiff and the second defendant to prepare an agreement confirming the plaintiff's intention of lending money to the second defendant. That was all the solicitor was asked to do at that stage.

16 The Judge did not refer to the solicitor's evidence that the plaintiff and the second defendant's brother each received a signed copy of the agreement and he did not keep a copy (84). The plaintiff agrees that an agreement was signed by the two parties and said "after that I left the office" (36).

17 Two letters from the firm referring to this agreement went into evidence but not the letters to which they were replies. The first dated 18 March 1998, written to the plaintiff's solicitors by a Mr J Maspero, stated:

"In the matter with [the second defendant] we prepared a document which was signed by both parties. This was in the form of a deed. We did not keep a copy of this document, [the plaintiff] having retained it".

18 The second, written to the Legal Services Commission, dated 24 May 1999, and apparently signed by the solicitor himself, stated:

"We also advise that we are not in possession of the loan agreement between [the plaintiff] and [the second defendant] and this was made clear to [the plaintiff] over 2 years ago.

It should be noted that [the plaintiff] and [the second defendant] approached the writer approximately in 1994 (I am not sure of the date given the fact that we are not in possession of the document) for the purpose of preparing a simple document to reflect the agreement between [the plaintiff] and [the second defendant's] family.

The document was to cement a relationship, which would be followed up with subsequent documentation namely from the Advance Bank which [the second defendant] would arrange.

The two documents were signed by [the second defendant's] family and [the plaintiff] and indicated, amongst other things, that [the plaintiff] would provide security of one of his properties to [the second defendant's] family in order for them to secure a commercial loan for a leased premises in Queensland".

19 The Judge did not refer to these letters. The solicitor was only asked a few questions about them in cross-examination and he maintained, despite the earlier letter, that the agreement was not a deed.

20 The plaintiff's mother tongue was Turkish, which the solicitor could not speak, and they communicated in English. The plaintiff had been in business in this country and had obviously prospered because he had acquired properties in Sydney and Brisbane. He claimed to be unable to read English, and said that he signed the agreement without reading it, without having it explained to him by the solicitor, and he implied that he did not receive a copy [par 16].

21 The agreement was not produced and is not in evidence. If the plaintiff did not bother to obtain or keep a copy or have it explained to him the inference, if his evidence was accepted, would be that he did not think it was of any great importance. This could be because it was only a statement of his intention which was wanted because it would be of some use in Queensland.

22 On the other hand if the plaintiff believed that the agreement was of some importance, it is strange that he did not have it explained to him before he signed it, and did not obtain and keep a copy.

23 The plaintiff said that he gave the solicitor instructions that three properties were to be in the agreement, one of which belonged to the second defendant, and the others to other members of her family (36, 38) because he "was giving $120,000 to the other party against the money" (38). He said that he would not have given the loan if no security had been offered (44). The second defendant said that the plaintiff "asked for the properties" (74) and "all I remember is he wanted a security towards $120,000" (75). She said she gave to the solicitor "the rate notice, the council rates, the telephone bill and the electricity bill. Just a proof". These were "security towards the $120,000". She said in her affidavit that she gave these documents to the solicitor and told him "so you can prepare the documents and perform your searches" (11).

24 The plaintiff's case, based on this evidence, was that he had asked the second defendant for security for the proposed loan, and she had offered three properties from her family. This had been agreed before they went to see the solicitor for their agreement to be documented.

25 The suggested agreement makes little sense. If the three properties were good security for $120,000 there was no reason for the plaintiff to become involved. If they were not good security, perhaps because they were fully mortgaged, further mortgages in favour of the plaintiff would have been of little value. These matters were not explored at the trial.

26 This part of the plaintiff's case finds no support in the letter of 24 May 1999 which refers only to a mortgage over the plaintiff's own property. The solicitor denied receiving any documents from the second defendant (85, 93). When asked in cross-examination whether the second defendant asked him to prepare mortgages and guarantees which were to be given by her mother, father and brother, he said: "I can't recall" (93). He then said, consistently with his letter, that "my understanding was that ... [the second defendant] was going to make the arrangements for loan documentation", meaning with the Advance Bank, and she would contact him when the need for mortgage documents arose. The Judge referred to this evidence.

27 It is, to say the least, unusual for a suburban solicitor to neglect an opportunity to do simple conveyancing work for a client, especially where the costs would be paid by someone else. If the solicitor was instructed to take mortgage securities over three properties to secure the repayment of $120,000 to the plaintiff, one wonders why he would not carry out his instructions.

28 The solicitor said he did not open a file (87) but did not say that he did not render a bill. During his cross-examination he was shown a document, which had been discovered by the plaintiff, which the solicitor identified as a receipt for payment (89) but it was not tendered. It may have been for costs paid by the plaintiff, but the Court will never know. The receipt, and any bill rendered by the solicitor, may have been highly relevant.

29 On 21 February 1994, presumably after the agreement had been signed, the plaintiff received an approval from the Advance Bank for a loan of $120,000 for a term of 16 years with monthly payments of principal and interest, to be secured on his property in Queensland. It specified a settlement period of four months but the loan was not made until on or about 14 September 1994 when one Patricia Bouzanis was acting as solicitor for the plaintiff in relation to the mortgage (18).

30 The plaintiff said in chief that he did not see the solicitor again "regarding to this matter" until some 14 months later (39). He said that the solicitor then rang and told him the loan was ready and he went to see the solicitor and found the second defendant there. The solicitor told him to go and get the loan from Patricia Bouzanis. The second defendant took him there and he signed documents and took the cheque. When he was asked how long this was after he signed the agreement in the solicitor's office he said he did not know, it could have been a week, 15 days or a month. He was not sure (39). This evidence was not corroborated by the second defendant, and it is inconsistent both with his earlier evidence on the same page, and the document in evidence which suggests that the loan was made on or after 14 September 1994 (18).

31 In cross-examination the plaintiff said that the solicitor wrote to him and gave him an address where he could collect the cheque and the second defendant then took him there (56). This was contrary to his earlier evidence [par 30] and the letter was not produced. The solicitor said he did not see any mortgage documents with the Advance Bank but that some time after the agreement was signed the second defendant rang and said that the mortgage documents were ready and asked him to come with the plaintiff to the offices of Kekatos & Associates Solicitors in Parramatta. The solicitor said that he wouldn't go and the documents should be brought to him but he heard nothing further (84). According to the solicitor he next saw the plaintiff in 1997 about an unrelated problem with the Commonwealth Bank.

32 The plaintiff said that he signed any papers that the second defendant gave him and did not read them because she did the reading and interpretation. He did not take the documents to the solicitor (52). He collected his title deeds from the Commonwealth Bank and gave them to the second defendant (56). He did not ask the solicitor whether he should do this (57). He also signed authorities directed to Kekatos & Co in relation to the disposition of the mortgage advance (15-17) which were brought to him by the second defendant (60). He said he signed every paper that she brought to him and did not take any of them to the solicitor (60).

33 There is a glaring improbability at the heart of the plaintiff's case. He wanted to see the solicitor urgently to have an agreement prepared which on any view was of a preliminary nature and at that stage no money changed hands. If, as the plaintiff claimed, the solicitor was to prepare mortgages to be given by the second defendant and her family, the plaintiff cannot have believed that the solicitor had done this. On his own evidence he did not consult the solicitor about any of the documents he signed at the request of the second defendant, or about handing over his title deeds which he said he had kept with the Commonwealth Bank for "safekeeping" (56).

34 He then signed the Advance Bank mortgage and gave the cheque to the second defendant without any reference to the solicitor. On his own evidence he was told by the solicitor, either by phone or by letter [par 30], to go to the office of Patricia Bouzanis to get the loan and does so without ever asking the solicitor about the securities and whether it was safe to lend the money, and without being told by the solicitor that the securities were in place.

35 Then after the second defendant defaulted the plaintiff, on his own evidence, did not ask the solicitor about his securities with a view to enforcing them and recovering his money. The earlier of the two letters from the firm that is in evidence [par 17] appears to respond to enquiries from the plaintiff's solicitors about the whereabouts of the second defendant, whether the solicitor had commenced legal proceedings against her for the recovery of the debt, and whether a copy of the agreement was available. There is no evidence of any enquiry by the plaintiff's new solicitors about the securities the solicitor was supposed to have obtained or any complaint before action about his failure to obtain them.

36 The plaintiff's conduct from the Monday in February 1994, when the agreement was signed until the filing and service of the statement of claim in 1999, was inconsistent with any belief on his part that the solicitor had obtained security for the debt from the second defendant's family, or been instructed to do so.

37 The Judge concluded by rejecting the allegation in par 6 of the statement of claim that the plaintiff retained the defendant "to prepare documentation in relation to the money [he was] to lend to the second defendant". He said:

"On consideration of the whole of the evidence I am not satisfied that the plaintiff ... retained the [solicitor] to prepare documentation in relation to money proposed to be lent by him to [the second defendant]". (emphasis supplied)

38 Read literally this finding was erroneous because it was common ground that the solicitor was retained to prepare an agreement and had done so. In fact the Judge had earlier found that the solicitor had been retained to prepare "some notice or letter confirming the intention of [the plaintiff] to lend money to [the second defendant]".

39 Properly understood the later finding [par 37], read with para 6 of the statement of claim, is a finding that the solicitor had not been retained to prepare "security documentation" for the loan. In paragraph 6 of the statement of claim, read in the context of paras 9 and 11(c), "documentation" means security documentation. Ground 12 in the notice of appeal makes it clear that the plaintiff's legal advisers understood this finding to reject the claim that the solicitor should have prepared security documentation. So understood the finding was fully supported by the evidence of the solicitor and of the later events, and ground 12 must fail.

40 The appellant's grounds of appeal, as amended, included two (1, 11) which challenged procedural rulings by the Judge, but these were expressly abandoned. Ground 5 has already been disposed of [par 13]. Four others (2, 7, 8, 10) challenged the Judge's findings about the evidence of the second defendant, but these were credibility based and protected by the Abalos principle. Those grounds must fail for that reason as must ground 6, which was that the Judge erred in not accepting the plaintiff's evidence. Two further grounds (3, 9) relate to the absence of reasons. These also fail given the conclusion that, properly understood, the Judge's reasons imply an acceptance of the solicitor's evidence in preference to that of the plaintiff.

41 The remaining ground of appeal is (4), that the Judge erred in not finding that the solicitor had breached his duty of care to the plaintiff. The Judge's finding that the solicitor's retainer was limited to preparing the agreement depends on his implicit acceptance of the solicitor's evidence in preference to that of the plaintiff, and his explicit rejection of the evidence of the second defendant. Those findings which cannot be disturbed dispose of ground 4 because there is no basis for a finding that there was negligence in the drafting of the agreement as such.

42 Since all grounds of appeal have failed the appeal must be dismissed with costs.

43 BEAZLEY JA: I agree with Handley JA.

44 GILES JA: I agree with Handley JA.

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LAST UPDATED: 18/02/2003