Lang v Licciardello [1999] NSWSC 93 (19 February 1999)

Last Updated: 22 February 1999

NEW SOUTH WALES SUPREME COURT

CITATION: LANG v LICCIARDELLO [1999] NSWSC 93

CURRENT JURISDICTION: Common Law Division

FILE NUMBER(S): 13085/95

HEARING DATE{S): 25 - 27 November 1998, 17 December 1998

JUDGDMENT DATE: 19/02/1999

PARTIES:

Allan Gordon Lang (P1)

Thelma Beatrice Lang (P2)

Sammy Licciardello (D)

Gregory Harrison Healey (XD)

JUDGMENT OF: Adams J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Mr S White (P)

Mr M Gorrick (D)

Mr S Stevenson (XD)

SOLICITORS:

John J Paine Ross & Co (P)

J A Brown & Co (D)

Mallesons Stephen Jaques (XD)

CATCHWORDS:

Contracts Review Act 1980

Mortgage by third party volunteer as direct debtor

Funds paid to borrower

Duty of mortgagee's solicitor

Conflict of interest

ACTS CITED:

Contracts Review Act 1980

DECISION:

Judgment for the plaintiffs and the cross defendant with costs

JUDGMENT:

17

THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

ADAMS J

FRIDAY 19 FEBRUARY 1999

13085/95

ALLAN GORDON LANG v SAMMY LICCIARDELLO & ORS

JUDGMENT

1 HIS HONOUR: By mortgage dated 10 May 1991, Mr Sammy Licciardello mortgaged his property at 95 Myall Street, Merrylands to Allan Gordon and Thelma Beatrice Lang to secure a debt of $110,000 plus interest. On 10 May 1993 that mortgage was discharged and a fresh mortgage was entered into between the same parties over the same property in respect of a debt of $105,600 plus interest. (Although the mortgages were in somewhat different terms, that is not material to the issues in this case.) Payments under the mortgage have been in default since February 1995. Proceedings were commenced in this Court on 22 August 1995 by the mortgagees to enforce the mortgage. The mortgagor defends the proceedings under the Contracts Review Act 1980, alleging that the mortgage was unjust in the circumstances relating to it at the time it was made. The proceedings are also defended under the Fair Trading Act 1987 and pursuant to an allegation of unconscionability. The essence of the relief sought is to render the mortgage unenforceable.

2 The solicitor concerned in the first mortgage was Mr Dennis McCabe who, sadly, died on 31 October 1992. His practice was, to some extent, acquired by Messrs G H Healey & Co who acted in connection with the 1993 discharge and fresh mortgage. Mr Healey is the subject of a cross claim alleging negligence in arranging for the execution of the 1993 mortgage; alternatively, he is sued for breach of contract and fiduciary duty, for alleged breaches of the Fair Trading Act 1987 and for being directly or indirectly concerned in conduct contravening that Act. Other parties have made brief appearances in the pleadings but they do not concern us.

3 Mr McCabe was first retained by Mr Lang (who, at all relevant times, acted for both himself and his wife) towards the end of the 1960s when he handled a lease for him on a small business in Kirrawee. In 1991 he handled the purchase and sale of two houses. Mr and Mrs Lang had invested the proceeds of the sale in the building society and informed Mr McCabe of his fact. It appears that Mr McCabe contacted the Langs in early 1991 to suggest that he might be able to arrange a mortgage advance at a more attractive rate than they were currently earning. It seems that this enquiry was precipitated by a request for funds from Mr Frank Licciardello (Mr Licciardello), the mortgagor's elder brother. He operated a business, Dynpack Pty Limited (Dynpack), involved in the building trade. Mr McCabe was Mr Licciardello's solicitor and was approached by him to obtain finance for Dynpack, which had what Mr Licciardello described as "a cash flow problem". He informed Mr McCabe that although he could offer no security, he would approach his brother to see whether he might be willing to provide some. Mr McCabe informed Mr Licciardello that a couple of valuations would need to be obtained. Mr Licciardello said that he told his brother that he needed a guarantee so that he could borrow money for his cash flow for Dynpack. His brother agreed to provide the guarantee but told Mr Licciardello : "Make sure nothing going to happen, I got the parents live with me. The last thing I want is to kick them in the street". Of course, this conversation, deposed by Mr Licciardello indicates that his brother was aware that it was proposed that his guarantee would be secured by mortgage over the house and that a failure by Mr Licciardello to repay the debt would result in his home being lost. No mention was made by Mr Licciardello in his affidavits of his telling his brother at any time either of the loan or of the instalments payable. For reasons which I mention later, I consider this omission to be most significant. Mr Licciardello deposed that at the time the loan transaction was entered into, he had a firm belief that the company would trade out of its debts and make full payment of the loan. There is no reason not to accept that this was the case. In due course, Mr McCabe informed Mr Licciardello that the certificate of title to his brother's property at 95 Myall Street was subject to a writ and another mortgage. Valuations were arranged by Mr Licciardello. During the course of discussions with Mr McCabe, Mr Licciardello said that he told him: "Look, don't give Sam too much detail because he might change his mind" and that Mr McCabe replied: "Look, I've got to do my job". Whilst this indicates that Mr Licciardello was prepared to manipulate his brother, it also indicates that Mr McCabe was alive to his responsibility to inform the mortgagor of relevant information. In his affidavit, the mortgagor does not advert to any conversation about his concerns that his parents might be homeless. According to the mortgagor, the conversation with his brother was to the following effect -

He said: "I need some money for a job. Can you guarantee the money? My payments will be $600 - $700 per month for two years". I thought about what my brother said to me and asked him how much he was borrowing. He said, "About $20,000". I said, "Well, that seems all right".

4 The fundamental complaint made by the mortgagor is not so much that he did not understand the nature of the obligations into which he was entering by giving a mortgage, but that he had been deceived by his brother as to the amount at stake.

5 When Mr Licciardello was called, counsel for the mortgagor sought and obtained leave (which was not objected to) to examine him in chief about the conversations that he had with the mortgagor when he sought his agreement to the guarantee and which were not adverted to in his affidavits. Mr Licciardello then gave evidence of the following conversation -

I said "I need some money because I got a big job. I am short of cash for it. Can you please help with this matter?" He asked me, "How much?" I said, "It's only a small amount. I don't know if it is $20, $25, [meaning thousands] something like that. We might take it for a period of time but it could be paid quick, about two years". I said that payments for the loan would be about $650 to $700 a month. He said, "As long as you are not putting me on trouble losing my house or things like that because you know I got parents who are living with me". I said, "Don't worry, I don't do those things to you for anyone".

6 Having regard to the later history of the matter, when the mortgagees sought to enforce the mortgage and commenced these proceedings, the fact that Mr Licciardello had lied (as he said he did, in his evidence) to his brother about the amount being borrowed, and thus brought about a catastrophe, must have been in the forefront of his mind. It is difficult to accept that, when giving his account of this conversation for the purposes of the litigation, that Mr Licciardello would have forgotten it. Indeed, he gave this evidence -

Q. Sitting there now you can't remember mentioning any figure to your brother can you?

A. The figure I remember, because I knew I was lying to him, because there's one thing. Because this thing, you know, things can't really come to me all the time. The way I feel, and the way I lied to him, so I remember this, what I said to him.

7 It is obvious that of crucial importance is what occurred on the occasion when the mortgage was signed in Mr McCabe's presence. Mr Licciardello says that his and his brother attended Mr McCabe's premises together and both were present in his office at the time that the mortgagor signed the mortgage. He said that Mr McCabe "explained the document in very few words". He said that his brother did not enquire as to the nature and effect of the document. The mortgagor gives a similar account, adding that he at no stage read the documents, nor were they read to him or explained in any way. He says that he was in the solicitor's office for no more than 5 to 10 minutes. During this time, Mr Licciardello and the solicitor were discussing matters not connected with the papers put in front of him. The mortgagor says it was at all times his belief that Mr McCabe was acting on his behalf.

8 The plaintiffs called Ms Tracey Arnold, who was employed as a legal secretary by Mr McCabe from April 1980 till August 1988 full time and then part time until November 1991, resuming full time work for him until he died in October 1992.

9 Ms Arnold said that she prepared the mortgage in this matter. It was unusual in that the rate of interest was higher and the principal sum greater than was common in the mortgages mostly prepared by her at that time. The account in her affidavit is as follows -

7. On the date that the First Mortgage was signed by Mr. Sammy Licciardello he arrived at Mr. Denis J. McCabe's office accompanied by his brother, Frank Licciardello. I spoke to both Sammy and Frank Licciardello in English. We exchanged greetings and neither Frank nor Sammy Licciardello indicated to me in any way on that occasion, or on any other occasion that they had any difficulty in comprehending the English language or expressing themselves in the English language. I had no difficulty on any occasion in comprehending their speech either when together or alone. After exchanging greetings with Frank and Sammy I then went to Mr. Denis J. McCabe who was in his office which adjoined my office with a thin partition separating the two offices. I then had a conversation with Mr. Denis J. McCabe to the following effect, "Sammy and Frank Licciardello are here to see you." Mr. McCabe said to me, "Please show them in." I then went and escorted Sammy and Frank Licciardello into Mr. McCabe's office and then went to my office.

8. It was Mr. Denis J. McCabe's habit to speak loudly in the office. After showing Sammy and Frank Licciardello into Mr. Denis J. McCabe's office. I heard Denis J. McCabe say words to Sammy and Frank Licciardello to the following effect, "Does Sam speak good English" Both Frank and Sammy Licciardello replied to Denis J. McCabe, "Yes." Mr Denis J. McCabe then said to Frank Licciardello, "Well Frank that being the case you will have to wait outside while I speak to Sam." Mr. Frank Licciardello then left Mr. Denis J. McCabe's office and went to the waiting area of the office where he sat down and waited until Mr. Denis J. McCabe and Mr. Sammy Licciardello had completed their conference.

9. During the course of the conference between Mr. Denis J. McCabe and Mr. Sammy Licciardello I heard Mr. McCabe say to Mr. Sammy Licciardello words to the following effect, "This is a Mortgage on your home and if you default in making the payments under the Mortgage you could lose your home. Do you understand that?" and I heard Mr. Sammy Licciardello reply to Mr. McCabe, "Yes." Mr. Sammy Licciardello was with Mr. McCabe in his office for a considerable time whilst Mr. Denis J. McCabe explained the terms of the First Mortgage and the nature of the Mortgage transaction to Mr. Sammy Licciardello. The conference between Mr. Denis J. McCabe and Mr. Sammy Licciardello was not cut short or carried out hastily and Mr. Denis J. McCabe spent longer than usual conferring with Mr. Sammy Licciardello in relation to the matter.

10 It was put to Ms Arnold in cross examination by counsel for the mortgagor, that when the two brothers were shown into Mr McCabe's room, the door was closed and they remained in the office together. Ms Arnold said that Mr McCabe's door could not close because bookshelves that had been built into the office obtruded into the door space. She acknowledged that she could not recall the whole conversation that she heard. Ms Arnold recalled, however, the way in which Mr McCabe spoke to the mortgagor: "He was very adamant and thorough to the point of being rude". She said, "He kept repeating things to the point that it was aggravating me so I can imagine what it did to the client". She felt that Mr McCabe was being very patronising towards Sammy Licciardello. Indeed, Ms Arnold approached Mr McCabe following the conference and remarked that she thought he was "a bit rude" when he continually asked Sammy whether he understood what he was being told and that Mr McCabe responded that he had to make sure that Sammy understood what he was telling him.

11 Mr McCabe's file, which has been produced, contains no note of this occasion or of the attendance. But Ms Arnold said that to make such notes was not Mr McCabe's usual practise. Ms Arnold denied that the meeting took no more than 5 or 10 minutes and that it was the purpose of the meeting merely to get the mortgagor to sign the documents. Ms Arnold corrected the account given in her affidavit in the sense that her recollection was not that the mortgagor would lose his home if he did not make the payments but that he would do so if Frank did not keep up the payments. She was quite certain that Mr Licciardello was in the reception area at the front of the office whilst Mr McCabe spoke to his brother.

12 Mr Sammy Licciardello had given evidence that he had attended Mr McCabe's office on only one occasion. However, Ms Arnold said that on one occasion Sammy came to the office with an instalment cheque, asked to speak to Mr McCabe and complained about the high interest rate, Mr McCabe telling him that he would have to wait until the term of the mortgage expired before it could be renegotiated. Ms Arnold agreed, however, that there were many occasions on which, on Mr McCabe's instructions, she needed to follow up late payments and, for that purpose, spoke to Frank Licciardello, usually telephoning him at his business premises. If the mortgagor delivered an instalment cheque and discussed the interest rate with Mr. McCabe, the inference that he was aware of its amount is strengthened.

13 Having regard to the manner in which the material witnesses on this point gave their evidence, I accept Ms Arnold's account without hesitation as being the most reliable. Mr McCabe, who was a solicitor of many years' experience, could have had no doubt about his duty to ensure that the mortgagor was aware of his obligations under the mortgage. It is the mortgagor's case that Mr McCabe acted both for him and for his brother, Frank. Whatever was the formal character of the retainer, the implicit rejection by Mr McCabe of Mr Frank Licciardello's request that his brother should not be told full details of the mortgage and the fact that he saw Sammy alone, points strongly to the conclusion that he proposed to inform him in detail of his obligations. This conclusion is corroborated by Ms Arnold's evidence of such part of the conversation as she was able to overhear. I conclude, therefore that Mr McCabe told Sammy not only of the amount of the mortgage but also of the amount and frequency of the instalments required to be paid.

14 I accept that both the Licciardello brothers had limited education and that, in particular, Sammy may have had some considerable difficulty in reading the mortgage and understanding its terms. On the other hand, it would have been difficult for him (though possible) to have overlooked the specification of the principal sum of $110,000 but a few centimetres from the place where he signed the document on its first page.

15 I have mentioned that the Myall Street property was subject to a mortgage given by Sammy to the Commonwealth Bank. The outstanding sum at the date of settlement was $11,548.79. It is obvious that Mr McCabe needed to inform Mr Sammy Licciardello of the discharge of this mortgage. It follows, of course, that the mortgage had to be at least for this sum in addition to whatever Frank Licciardello needed. Indeed, on 13 May 1991, he wrote to Mr Licciardello at 95 Myall Street Merrylands, setting out the discharge sum, the mortgage advance and the costs and disbursements relating to the transaction, noting that the balance of $95,512.21 was to be paid to Mr Frank Licciardello and asking Sammy to confirm this by signing a duplicate letter which was attached. No such letter signed either by Sammy or Frank Licciardello is in the file. Mr Sammy Licciardello denies receiving the letter of 13 May and the statement sent with it. However, I think that the letter and statement were sent and I think it probable that he received them. On 16 May 1991, Mr McCabe forwarded to Sammy, under cover of a letter addressed to him at 95 Myall Street, Merrylands, a copy of the epitome of mortgage, which clearly sets out the principal sum of $110,000, the interest rate and the amounts of quarterly payments. Sammy denies receiving this correspondence as well. However, I think it probable that in fact he did receive it. On 6 June 1992, Mr McCabe addressed a letter to Sammy at his home, reminding him that the interest payment due on 10 May had not been paid and that a cheque for $5,018.75, calculated at the penalty rate of interest, was required immediately. The letter pointed out that the due dates on the mortgage were the 10th of each of August, November, February and May. Mr Licciardello denies receiving this letter. Again, I think it probable that he did receive it. At the very least, it appears to me that it was most unlikely that none of these three communications were actually delivered and any one of them would have informed Mr Sammy Licciardello of the amounts (one way or another) actually involved. Ms Arnold's evidence was, where it was necessary to chase up mortgage payments, a letter would go out to Frank Licciardello (addressed to his brother, as I understand it) and a copy would be sent to Sammy's home address, to let him know that the mortgage was in arrears. Where a letter was addressed to Mr Sammy Licciardello's home, she would expect it to have gone to him. Some letters in the file are addressed to Sammy Licciardello care of his brother. Ms Arnold thought that copies of those letters would have been sent directly to Sammy but she could not be certain that this occurred on every occasion.

16 It is not in dispute that the proceeds of the mortgage were to be used by Frank Licciardello for the purposes of his business and that, except in so far as the amount used to discharge his mortgage to the Commonwealth Bank is concerned, the mortgagor was a volunteer. It was submitted to me that one of the unjust elements on the transaction was that rather than there being a direct contractual relationship of borrower and lender created between the Langs on the one hand and Frank Licciardello on the other, with Sammy Licciardello then entering into a guarantee secured by a mortgage, the principal borrower was, in the result, Sammy Licciardello. In some circumstances, the fact that there was no direct obligation created between Mr Frank Licciardello and the Langs, might be significant. However, in the circumstances of this case, I do not think that anything turns on this matter. Sammy, himself, stated in evidence that he was aware that, if his brother did not continue to pay the instalments required, he would need to take them over in order to fulfil his obligations as guarantor. The fact is that, with delays from time to time, Mr Frank Licciardello indeed made the instalment payments. As a practical matter, there were good reasons for simplifying the transaction as between the Langs and Sammy by providing that he should be the principal debtor as well as the mortgagor. On the other hand, the lack of any formal agreement between the two brothers certainly might have operated to Sammy's disadvantage. In the context of this litigation, however, and having regard to the events that have happened, this does not seem to me to be relevant. Certainly, no relief is sought by Sammy Licciardello as against his brother in connection with the transaction.

17 Although there is a hint in Mr Frank Licciardello's evidence that might provide a basis for suggesting that he exercised undue influence on his brother in connection with this matter, no case of this kind has been made out nor is it claimed. Sammy's evidence is quite clear. He says that had he been aware of the true extent of the loan he would not have agreed to secure its repayment. However, I have concluded that he was aware both of the principal sum and the interest payments due under the mortgage. So far as any claim of relief relates to this mortgage, it follows that I should find for the plaintiffs.

18 However, the mortgage sought to be enforced is the fresh mortgage entered into in May 1993. It is necessary to move to the circumstances in which that mortgage came to be executed.

19 It is worth pointing out, before moving on, that according to Frank Licciardello, and I accept his evidence, when the first mortgage was entered into his financial position was very good, although he had some problems with cash flow. He was involved in a big project at a substantial office and commercial site in Sydney which would have more than covered the amount that he was borrowing, the expected profit being over $600,000. Unfortunately, however, the contract became the subject of litigation and Dynpack was not paid for the job. Although on some occasions payments were late and, as a consequence, penalty interest was incurred, Dynpack made all payments of interest under this mortgage.

20 As I have mentioned, late in October 1992 Mr McCabe died, and his practice was taken over by Messrs G H Healey & Co in December of that year. Shortly afterwards, Mr Lang spoke to Ms Robinson, who was then the solicitor in charge of the Hurstville practice of the firm, to discuss the mortgage with her and, in particular, to advise that the interest payment due on 10 November 1992 was in arrears. It appears that on 8 December 1992, Mr Frank Licciardello had raised with Ms Robinson some matters arising out of a trader's bill of sale, unconnected with this matter. At this time, it seems, Mr Frank Licciardello informed Ms Robinson that he would bring in a cheque in the next day or so to pay outstanding interest. He informed Ms Robinson that he wished to extend the mortgage for a further two or three years at a cheaper rate of interest. On 13 January 1993, the firm wrote to Sammy at his Merrylands home to inform him that the Langs were willing to extend the term of the loan for a further twelve months at the interest rate specified in the letter which was somewhat less than the interest rate charged under the 1991 mortgage. Failing agreement to "vary" the mortgage, then it would be discharged. This letter refers to "discussions we have had with you" concerning the matter. This letter was apparently sent by Miss McCabe, the daughter of the late Mr McCabe, who was employed in his practice. However, I do not think that the letter provides a sufficient evidentiary basis for me to infer that discussions had actually occurred with Sammy as distinct from Mr Frank Licciardello. Indeed, I think it most unlikely that there would have been any such discussions. By some time in January, Ms Robinson learned, probably from Mr Lang, that the loan was for the benefit of Mr Frank Licciardello although his brother had provided the mortgage security. Towards the end of the month, Ms Robinson wrote to the Langs to advise them that "Mr Licciardello" (I infer that this was Frank) sought an extension of the term of the existing loan for a further 24 month period at a lower rate of interest. The Langs were also advised that the payment due on 10 November 1992 had been received and would be sent on to them when the cheque was cleared. On 27 January 1993, Mr Lang instructed Ms Robinson that he would approve an extension of the loan at an interest rate of 12.5%, but that the penalty rate for late payment of interest would be 14.5% rather than the 13.5% offered by Frank Licciardello. I think it fair to infer that this increase reflected the delays experienced in the past by Mr Lang in due payment of the interest instalments. On 11 March 1993, Ms Robinson set out in a letter addressed to Mr Sam Licciardello, care of his brother at the latter's business premises, proposed mortgage renewal terms, specifying the principal as $110,000, the term at 24 months, the interest rate at 12.5% with the penalty rate of 14.5% for late payment and repayment dates as fixed by the earlier mortgage. Further valuations were required. The payment which was due on 10 February 1993 had not been made and this matter was brought to Mr Licciardello's attention and a request made for immediate payment of the instalment. The letter stated that if the outstanding instalment was not made, then the mortgagees would require repayment of the whole of the principal on the expiry of the mortgage. On 19 March, Mr Lang instructed Ms Robinson to remind Mr Licciardello (presumably Frank) that the next payment was due on 10 May and, if not then paid, he would reconsider the grant of the new mortgage. It seems that the February instalment was not paid until early April 1993. Ms Chadwick, who was then handling the matter in G H Healey & Co, pointed out to Mr Lang that there was a history of making late interest payments and advising him to consider increasing the penalty rate specified. There was no suggestion, however, that Mr Licciardello was in financial difficulties; rather, he was characterised as a tardy payer.

21 Mr Frank Licciardello deposed in his affidavit to a conversation which he alleged occurred with a Ms Maria Reid from G H Healey & Co, in which Ms Reid said to him that he must either renew the mortgage or pay the debt or legal proceedings would be commenced. He said that he responded that he could not afford to pay the mortgage out at that time as he was involved in litigation with a company which had not paid him and he did not have other funds. Under cross examination he said that he was unable to remember the name of the person with whom he had this conversation nor was he certain of the time and he agreed that the conversation might have occurred either with Ms Chadwick or with Ms Robinson. However, both denied that this conversation occurred. Ms Robinson had carriage of the matter at the material time and said that he believed that she had no such conversation with Mr Frank Licciardello because had he said words to that effect, she would have been concerned and would have wished to undertake investigation and raise the matter with the Langs. Indeed, one would expect that there would have been a file note to this effect. However, in the result I do not think much turns on the point. If Mr Frank Licciardello was, in fact, unable to repay the borrowed sum as at May 1993, then that would simply have had the effect of triggering the default provisions and enabling the Langs to proceed against the property. In the result, the new mortgage extended the period of the loan, effectively, and gave Mr Frank Licciardello time in which to put his affairs in order. Even so, I have no doubt that had there been a real question raised concerning the financial position of Mr Frank Licciardello the Langs would, in all probability, not have renewed the loan. Sammy's position was not made worse by the extension of the loan on the assumption that Frank Licciardello was, indeed, insolvent. It is, perhaps, true that further amounts of interest would not have accrued under the fresh mortgage, but the second mortgage provided, in the result, for a penalty interest rate of 16.5%, significantly less than the penalty interest rate applicable under the 1991 mortgage of 18.25%, whilst the applicable interest rate on due payment was, under the 1993 mortgage, 12.5% as distinct from 16.25% under the 1991 mortgage. However, it is unnecessary to enter into the effect of the extension since I am of the view that it was the overwhelming likelihood that no suggestion was made by Frank Licciardello of any difficulty in paying the loan. Aside from the uncertain nature of his evidence on this point, it is most unlikely that he would have intimated that he was in difficult financial circumstances given that he was extremely anxious to obtain an extension of the loan. Ms Chadwick also denies being informed by Frank Licciardello, or anyone else, that he was in financial difficulty. Counsel for Sammy did not suggest in submission any advantage that might have accrued to this client if the loan had not been renewed in 1993.

22 There was some evidence which I do not think it necessary to analyse and which was the subject of dispute concerning communications between Mr Lang and Mr Frank Licciardello over late payments. Even if Mr Frank Licciardello's evidence be correct, and I am far from accepting its reliability in this regard, it does not justify an inference that Mr Lang was aware that Mr Licciardello was unable to service his brother's mortgage.

23 At the end of April 1993, Ms Chadwick wrote to Mr Sammy Licciardello care of his brother at the latter's business address indicating that the Langs were prepared to enter into a new mortgage with him if the interest payment due on 10 May 1993 was paid promptly. Shortly afterwards, a valuation of 95 Myall Street was undertaken on Mr Frank Licciardello's instructions. Its reduced value resulted in a deduction of $4,400 from the proposed advance of $110,000. The draft mortgage contained the larger sum and was amended in manuscript to the lower amount. Ms Chadwick said she pointed out to the brothers (but conceded in cross examination that it may have been only to Frank) that the value was $160,000 and that the mortgagees would lend only two-thirds of that value with the consequence that the principal of the loan was reduced to $105,600 and that the outstanding difference of $4,400 interest would need to be paid before the advance would be made. That amount was shortly afterward paid, probably directly to Mr Lang although this is somewhat uncertain. Sammy Licciardello's initials, in accordance with usual practice, appear in the margin next to the alteration in the figures to which I have referred. Ms Chadwick says that she would have pointed out, following her invariable practice, the alteration to Mr Licciardello at the time that she asked him to initial the change. Mr Sammy Licciardello insists that he did not notice any particular figure and assumed that the mortgage was for the lesser sum, which he says that his brother had told him he was borrowing in the first place. Whilst I do not think I can be certain about this, I think that the probability is that Ms Chadwick did point out the figure and that it did not cause Mr Sammy Licciardello to take particular notice because he was already aware of the amount of the advance. Ms Chadwick's evidence was, and about this there is not dispute, that she did not give either of the Licciardello's any advice as to the nature of the transaction or the document, because in her view, she did not act for them but, rather, was acting for the Langs. I have no doubt that this is correct and that neither Frank Licciardello nor Sammy believed Ms Chadwick was acting on their behalf. Counsel for Mr Licciardello submitted that I should infer a retainer from the terms of the account sent to Mr Licciardello by G H Healey & Co which contains the following paragraph -

To our professional costs for acting in relation to the mortgage on your behalf in consideration of $105,600 as per scale...

24 However, I am satisfied that this wording was inappropriate, probably pro forma, and did not in fact rest upon any retainer. It is, of course, a usual conveyancing practise that the mortgagor pays the mortgagee's legal costs.

25 I have referred to Ms Chadwick's evidence that she did not give any advice about the mortgage to Mr Licciardello because he was not her client. I think, however, that I should point out that it was in the Langs' interest, that is, the persons for whom she did act, that the intending mortgagor should be informed of the material characteristics of the transaction. The Contracts Review Act had, after all, been in existence since 1980 whilst the equitable doctrines relating to mortgages, especially those given by third party volunteers had, of course, been part of the law for a long time (see Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447)). There is no doubt that the most desirable position is that such a mortgagor should be given independent legal advice but, in the circumstances facing Ms Chadwick, it seems to me that, quite apart from any interest of Mr Licciardello, it was in the interest of the Langs that the salient points of the mortgage should be explained to him. It seems to me that the supposition that a mortgagee's solicitor is in conflict with the interests of that client if he or she gives advice to the mortgagor on the legal effect of the mortgage is a significantly inaccurate over-simplification of the position. However, having regard to the issues in this case, which are concerned essentially with Mr Sammy Licciardello's knowledge of the amounts of the loan and the instalments, it is unnecessary for me to deal further with this aspect since I have concluded that he was well aware of these matters.

26 I should mention that tendered before me without objection is the affidavit of Dr Lim, who was Mr Sammy Licciardello's physician since 1987. His report indicates a number of severe medical conditions associated with diabetes and complicated by anxiety. I have considered the possible effect of these difficulties on his ability to give evidence in a way that was fair to his case and, as well, on its possible impact on his understanding of the nature of the transaction. However, making every allowance in his favour arising out of the regrettable state of his health, I consider that the findings of fact to which I have referred and which are adverse to him are nonetheless appropriate. No case was sought to be made that his illness was known to or ought to have been known to any of the relevant persons with whom he had contact concerning the mortgages and, having regard to the limited character of the essential issues, I am quite satisfied that his health would not provide any basis for relief.

27 Accordingly, I give judgment for the plaintiffs and the cross defendant with costs. The plaintiffs are to draw up a minute of orders giving effect to this judgment.

LAST UPDATED: 19/02/1999