Hunt & Hunt Lawyers v Mitchell Morgan Nominees & Ors [2012] HCATrans 344 (12 December 2012)

Last Updated: 3 April 2013

[2012] HCATrans 344

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S270 of 2012

No S95 of 2012

B e t w e e n -

HUNT & HUNT LAWYERS

Appellant/Applicant

and

MITCHELL MORGAN NOMINEES PTY LTD ACN 108 571 222

First Respondent

MITCHELL MORGAN NOMINEES (NO 2) PTY LTD ACN 111 009 557

Second Respondent

ALESSIO EMANUEL VELLA

Third Respondent

AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD

Fourth Respondent

FRENCH CJ
HAYNE J
KIEFEL J
BELL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 12 DECEMBER 2012, AT 11.56 AM

Copyright in the High Court of Australia

____________________

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR N. KABILAFKAS, for the appellant/applicant. (instructed by King & Wood Mallesons)

MR B.A.J. COLES, QC: If your Honours please, I appear with my learned friends, MR S.B. DOCKER and MS L. WALSH, for the first and second respondents. (instructed by Mills Oakley Lawyers)

FRENCH CJ: There are submitting appearances for the third and fourth respondents. Yes, Mr Jackson. (instructed by Slater & Gordon Lawyers) (instructed by Henry Davis York Lawyers)

MR JACKSON: Thank you, your Honours. Your Honours, as the Court is aware, this matter involves an appeal on the issue of our liability to the respondents on the one hand and an application for special leave to appeal on the question of the rate of interest payable to the respondent, and may I deal with them in that order?

Turning to the appeal, your Honours, the issue in the appeal concerns sections 34 and 35 of the Civil Liability Act 2002 (NSW). They are provisions, the object of which stated in broad terms was to bring to an end the principle that in the case of multiple wrongdoers, whether joint or several, each wrongdoer was liable to the plaintiff for the whole of the plaintiff’s loss.

May I take your Honours now to section 35(1) which seeks to effect that aim? Your Honours will see that section 35(1) provides that:

In any proceedings involving an apportionable claim: –

a term which is defined and I will come to in a moment –

(a) the liability of a defendant who is a concurrent wrongdoer –

again a defined term to which I come –

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 –

Your Honours, as will be apparent from the terms of section 35(1) there are, relevantly, two aspects which must be satisfied before section 31 applies and they are, first, that the proceedings involve “an apportionable claim” and, secondly, that the wrongdoer seeking the benefit of section 35(1) is a concurrent wrongdoer. Now, as to the first of those matters, the “apportionable claim”, that is a term defined in section 34(1) and your Honours will see in paragraph (a) it is:

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 personal injury claims are excluded. Your Honours, may I say in relation to that issue or that matter that it was not in issue in the proceedings that the claim being made against us by the respondents was an apportionable claim as defined in section 34(1). Your Honours will see that from the reasons for judgment of Justice Giles in the Court of Appeal in volume 2 at page 860, the first sentence in paragraph 27 at the bottom of the page. Now, your Honours, the question rather was whether there were concurrent wrongdoers, concurrent wrongdoers being defined by section 34(2) as meaning – or a concurrent wrongdoer in the singular is:

a person who is one of two or more persons whose acts or omissions . . . caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

Now, your Honours, may I come back to that aspect in just a moment, but could I refer first to the basic facts, which are summarised, your Honours, in written submissions in-chief in paragraphs 11 to 14. Could I just indicate where your Honours will find those matters referred to in the judgments below. The first aspect of it, your Honours, is that Caradonna and Vella opened a joint account with the ANZ Bank on 21 December 2005. You will find that referred to in the Court of Appeal’s reasons in paragraphs 6 to 8 at page 855, and the reasons for setting up the account are set out there.

Your Honours will then see, and this is referred to in paragraph 10 of the Court of Appeal’s reasons at page 856, that Caradonna obtained possession of three certificates of title to property which Vella owned. Now, two of those, your Honours, were used by Caradonna in a fraud on permanent trustees. That is no longer relevant in the proceedings.

Your Honours, the third certificate of title, however, is relevant. It related to what is described in the proceedings as the “Enmore property”. Your Honours, the Enmore property was mortgaged to the respondents to support a purported loan from them to Vella, and could we refer your Honours to what was said by Justice Giles at page 856 in paragraph 11, dealing with that loan. Your Honours will see – I should perhaps say the last sentence of paragraph 10:

Caradonna obtained possession of Mr Vella’s certificates of title and, unknown to Mr Vella used them to borrow money for his own purposes.

Your Honours will see in paragraph 11 that one borrowing was from the respondents and that:

Mr Caradonna caused an application for finance to be made in Mr Vella’s name through a mortgage broker. He forged Mr Vella’s signatures to a loan agreement, a mortgage of the Enmore property and associated documents.

He was assisted by his cousin, the dishonest solicitor, Flammia, who dealt with the respondent’s solicitors, namely, the appellant and misrepresented to them that the documents had been signed before him by Vella and that Vella was the person in some identification documents. Your Honours, could I mention specifically what you see in the last two sentences of paragraph 11, that:

The mortgage was registered on 19 January 2006. Upon confirmation that it had been registered –

the respondents paid the money –

to the credit of the joint account in accordance with a direction given by Mr Flammia purportedly as Mr Vella’s solicitor.

Your Honours, the next feature is that the money paid by the respondents into the ANZ Bank account did not stay idle there. You will see that referred to in paragraph 13.

FRENCH CJ: Everything was in and out pretty quickly, I think.

MR JACKSON: Indeed, your Honour, and that often happens with frauds, of course. Mr Vella, who had been overseas for the time of much of these events, did not find out about them until May 2006. You will see that referred to at page 857 in volume 2 at paragraph 14. Now, your Honours, in the proceedings at first instance the judge made the findings to which the Court of Appeal referred at page 857 in volume 2 in paragraphs 15 to 18. Could I note, your Honours, that a summary of them in short form is set out in paragraph 18 of our written submissions in-chief and he held, in effect, that Vella was not liable on the personal covenant because the loan agreement was void by reason of the forgery.

The mortgage, also forged, secured nothing because it purported to secure an indebtedness by reference to the void loan agreement. It did not gain the benefit of indefeasibility from section 42 of the Real Property Act and we had been in breach of the duty of care by drafting the mortgage in a way which, to put it shortly, made the amount that was payable, the amount due under the mortgage or the amount covered by the mortgage, relating to a particular document or indebtedness which itself was no good because of the forgery, whereas a line of cases in New South Wales had held, one might say perhaps a little surprisingly in the end, that there could be a mortgage that though forged would secure the indefeasibility provide that it simply nominated the sum which was to be secured by a mortgage.

FRENCH CJ: There was some relevantly recent decision of the Court of Appeal I think on which Justice Sackville sat in relation to that, was there not - Permanent Trustees?

MR JACKSON: Yes, your Honour, which summarise that. I will give your Honour the reference to that later, if that is satisfactory. It summarised a number of propositions dealing with it. But, your Honours, that was the position that was not challenged in the courts below by our side. Now, your Honours, as a result the respondents had paid away the million-odd dollars in circumstances where they could not recover the money from Vella by enforcing the mortgage against the property.

Caradonna and Flammia were liable to the respondents for this loss by reason of their dishonest conduct and the judge went on to hold at first instance that they were concurrent wrongdoers with the appellant within the meaning of the provisions to which I have referred, sections 34 and 35, and held they were responsible for 12 and a half per cent.

Now, your Honours, could I come then to the application of the Act in relation to those circumstances? In order for us to have the benefit of the provisions of the Act, of section 35(1), we had to be a concurrent wrongdoer, and your Honours, concurrent wrongdoer is a term defined by section 34(2), and it requires that there be:

two or more persons whose acts or omissions . . . caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

FRENCH CJ: So there can be joint wrongdoers or several concurrent?

MR JACKSON: Indeed, your Honour, I am going to emphasise that in a moment, if I may, with respect. Your Honours will note particularly, as your Honour the Chief Justice has observed, that the provision uses the expressions “independently of each other or jointly” which seems to be a reference to the relatively well-established concepts of joint liability and several liability and the fact that – I will come to this a little later – that loss can be caused successively by tortfeasors who have nothing to do with each other apart from themselves each contributing to the loss, but may I return to that?

Now, your Honours, in our written submissions in paragraph 47 we say that the only thing that is required in terms of section 34(2) for there to be the relevant concurrence is that there is a concurrence in liability for the loss, and what is not required is that there be:

concurrence in the acts or omissions constituting the breaches of duty or the steps in the chain of causation –

and, your Honours, independently of each other the reference to several liability makes that apparent, in our submission. Now, your Honours, in this case, we contend that there were concurrent wrongdoers in that we were – we, Hunt & Hunt collectively were one such person and Caradonna and Flammia were the other. Now, your Honours, it is immaterial, of course, that the causes of action were different. Rather, the question is whether each “caused”, to use the words of section 34(2), the damage or loss that is the subject of the claim.

KIEFEL J: Are you relying on a chain of causation of the two operating together to produce the same damage?

MR JACKSON: Yes, your Honour, I am just about to – I was going to say “loss”, your Honour, if I may with respect, but could I turn then to the question of identification of the loss. I prefer not to use the term “damages” if it is a reference to the term to the actual quantification of - - -

KIEFEL J: I said “damage” without the “s”.

MR JACKSON: Yes, thank you. Could I turn to the identification of the loss. Your Honour, another – I am sorry to keep interpolating things but your Honour will see that the provisions of section 34(1)(a) speak of:

economic loss or damage to property –

It may be that the term “loss” is the term more apposite to a case of this kind where the loss is economic and that damage is principally referring at least to property, although, the two terms very frequently are synonymous or interchangeable. Could I turn, your Honours, to what we would submit is the identification of the loss? Now, your Honours, the respondents were lenders. They lent money and did so on the security of a mortgage over land. Your Honours, there is nothing very unusual about that. It happens daily, many hundreds of times I would expect in Australia.

In the event of default by a landowner or homeowner, it gives the lender the ability to recover the money lent in two ways. One is from the borrower in proceedings against the borrower. The other is by the exercise of rights in relation to the security. In the present case, the loan was procured without the authority of the person who had been treated as the borrower. The money could not be recovered from him. The respondents could not recover the money by the purported mortgage from him because it was drafted in a way which would not allow that to happen.

Now, your Honours, in those circumstances, as we say in our written submissions in paragraph 41, the immediate consequence was that the respondents advanced money to Vella and had done so on the faith of an ineffective security. The “harm” they sustained was their inability to recoup the moneys advanced from the borrower or from his mortgaged property. If I turn to the position of Caradonna - - -

GAGELER J: Is that a different identification of “harm” from what is in paragraph 4 of your outline of submissions?

MR JACKSON: Paragraph 4?

GAGELER J: Of your outline of oral argument.

MR JACKSON: No, I do not think so, your Honour, no. If I can just pause at that point, your Honours. So far as the position as between us and the respondents, we would submit that the harm that was sustained was an inability to recover the moneys either from the borrower or from his mortgage property. If one turns to the position of the other concurrent wrongdoers, as we would put them, Caradonna and Flammia fraudulently obtained the making of an advance to Vella fraudulently by their forgery. They misappropriated the money advanced. Because of the fraud and forgery, the borrower was not liable to repay the moneys to the respondents, and Caradonna and Flammia were liable for the loss sustained by the respondents. Your Honours, it is thus a case, in our submission, where the moneys advanced by the respondents could not be recovered from the borrower or by resort to the borrower’s property because of the fraud of Caradonna and Flammia on the one hand, and because of our negligence on the other.

Your Honours, could we also add that this is a case where, in our submission, it was clear that the loan would not be made without the mortgage security, and the mortgage security of course would not be required unless there was a loan. Could I give your Honours two references in that regard? The first is in the Court of Appeal’s reasons at paragraph 11 on page 856, volume 2. It is a paragraph to which I took your Honours earlier, but I wanted to go to the last four lines of that paragraph where his Honour noted:

The mortgage was registered on 19 January 2006. Upon confirmation that it had been registered, Mitchell Morgan paid $1,001,748.85 to the credit of the joint account in accordance with a direction given by Mr Flammia purportedly as Mr Vella’s solicitor.

So, your Honours, the notification that the mortgage had been registered was a step leading to the payment out of the moneys in the first place. It is put, your Honours, referred to also at page 620 of volume 2 in the reasons for judgment of the primary judge at paragraphs 56 to 58 where a little more detail is given, and so far as the names are concerned, Mr Gabelich was the officer of Hunt & Hunt, Mr Virago the officer of the respondents. You will see that there was the confirmation and then the disbursement.

Your Honours, we would submit, and this is the matter that lies really at the heart of the case, that in circumstances where the transactions involved a loan of money are on mortgage security and if necessary, we say, mortgage security given by the supposed borrower, it is, with respect, difficult to see why the loss sustained by the respondents is not the inability to recover from each source the money so advanced. Your Honours, we accept, of course, that the essential question is whether the – sorry, your Honour.

HAYNE J: Sorry, could I just interrupt you a moment? The loss might be identified – I do not know whether this is right or not – as the inability to recover, in effect, full stop. Inability to recover the more ample expression would be whether by repayment or realisation, but I suspect a characterisation is inability to recover. But is that right or am I truncating it?

MR JACKSON: I think, your Honour, if I could put it this way. Inability to recover, speaking of course of the moneys advanced, that is the genus in a sense, and the possible places of recovery may reflect the species of that genus or the working out of that proposition, but I accept your Honour’s proposition. Now, your Honours, I was going to say that we accept, of course, that the essential question is whether the acts or omissions of the suggested concurrent wrongdoers caused the same loss, but one asks what is the loss in each case? Why is it not simply the inability to recover the money lent and that, I think, is in a sense the proposition that your Honour was putting to me.

Now, your Honours, we would submit that contention is supported by some observations of Justice Gaudron in Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25; (1999) 199 CLR 413 at 424. I wanted to refer particularly to paragraphs 16 and 17. Your Honours will see in paragraph 16 her Honour said:

The interest that a mortgage lender seeks to protect by obtaining –

and she is speaking in the case of a negligent valuation –

a valuation of the proposed security is not simply an interest in having a margin of security over and above the mortgage debt. Rather, it is that, in the event of default, it should be able to recoup, by sale of the property, the amount owing under the mortgage.

Her Honour went on to say in the last five lines of that paragraph:

Moreover, the time that loss occurs (and hence the time when the tort is complete) is when recoupment is rendered impossible. In the case of a mortgage transaction, that will occur when it is reasonably ascertainable that sale will result in a loss. At the earliest it will be when default occurs and, at the latest, when the property is sold.

Your Honours will see in the next paragraph her Honour said:

17 Once the interest which calls the valuer’s duty of care into existence is identified as the interest of the mortgage lender in recouping what is due under the mortgage in the event of default, it is simply a matter of common sense to treat the loss arising from inability to recoup as flowing from breach of that duty –

et cetera. Your Honours, could we refer also to what was said in the Court in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 532. At the bottom of the page, your Honours, 532, four members of the Court observed:

The conclusion which we have reached with respect to the time when the plaintiff first suffers loss in respect of contingent loss or liability accords with the comment of Gaudron J. in Hawkins v. Clayton (77) –

and your Honours will see the passage quoted, including the part emphasised in the passage:

for the actual loss is sustained only when recoupment becomes impossible”.

One does have a situation in cases of this kind, in our submission, that you have a borrower who, as part of the transaction, gives security. The purpose of giving security is to enable the amount of the advance to be recouped from it – at least, to the extent of the security – if there is not payment in accordance with its terms – with the terms of the arrangement. In those circumstances, the two aspects are inevitably intertwined and, in our submission, inextricably intertwined because, as one saw from the passage to which I referred in the judgment of the Primary Judge here, the giving of the money, the payment of the money was dependent upon notification that the security for the money had been purportedly executed.

So it is a difficult concept, in our submission, to say that there are two kinds of loss – and I will come to this in a moment, your Honours – but difficult, in our submission, to say there are two kinds of loss, that they are different levels, they relate to different matters in some way, because they both relate to the loss in being unable to recoup the money in any of the possible ways. Could I take your Honours for a moment to our written submissions in the - - -

FRENCH CJ: The value of the secured property – the possibility – I know it was not this case, but the value of the secured property might be less than the amount secured - - -

MR JACKSON: Of course.

FRENCH CJ: - - - have anything to say about the distinction between the loss sustained by reason of negligence in drawing the mortgage and the loss sustained by reason of the fraudulent conduct of the others.

MR JACKSON: Yes. Your Honour, in particular cases, the amount of the loss which may be recoverable from one of the concurrent tortfeasors may differ from that which is able to be recovered from another. In a particular case, one could say, if it had been the case that the amount of the mortgage or the mortgage property was worth less than the amount in question, that the limit of the limit of liability for our negligence would be the amount that could have been obtained from the sale of the mortgaged property. That would be the limit of our liability but, at the same time, the fact that there is a limit on the number of dollars for which we might be liable as a loss does not alter the quality of it, in our submission.

Your Honour, I am going to come to that aspect quite shortly, if I may, but could I refer your Honours to paragraph 51 of our written submissions which deals with the matters to which I referred. Could I go, then, your Honours to the reasons of the Court of Appeal for arriving at a different conclusion. They commence, relevant I think, your Honours, at page 863, paragraphs 33 and 34. Paragraph 33 is, in a sense, introductory but if one goes to paragraph 34, their Honours set out in the middle of paragraph 34, obvious enough:

Mitchell Morgan claimed for economic loss, not for damage to property. The acts or omissions of the other person or persons must be those giving rise to their liabilities to the claimant.

Your Honours, there is a slight ambiguity about what is meant there by saying “must be those giving rise to their liabilities to the claimant”. If that means giving rise to the loss, one would not disagree with the proposition. If, however, it is saying there must be some intertwining of the steps on the way to the loss, then that really seems to add something that is not contemplated by the statute, particularly when the statute recognises that the liabilities may be several, not joint.

BELL J: Is that clarified by the concluding sentence of paragraph 34?

MR JACKSON: Yes, I was going to come to that, your Honour. What I was going to say, if one looks at the concluding sentence of paragraph 34, your Honours will see the way in which that is set out and it may well be correct, that sentence, but may we say this in respect of it. If that is the test to be applied, then we would submit that there was really only one answer to it, and the answer was one favourable to us, namely, that but for “the acts or omissions of Mr Caradonna and Mr Flammia” there would have been no loss sought to be recovered by reliance on the security. Your Honours, one then sees at paragraphs 36 to 41 - - -

HAYNE J: Just before you come to 31 to 41, the first bullet point in 35 records submissions where the loss is described as “the absence of mortgage security”. Does that submission capture a species of loss?

MR JACKSON: In our submission not, your Honour, and it does not because absence of mortgage security may have no effect whatsoever, it is a step on the way towards arriving at loss but it is not loss itself.

KIEFEL J: The loss has not occurred at the point of the mortgage security being deficient, it is at the point as - your references to Justice Gaudron’s judgment say.

MR JACKSON: Yes.

KIEFEL J: - - - it is when you attempt to recover.

MR JACKSON: Yes, your Honour. Indeed, your Honour, it is perfectly possible to have a situation where there was a mortgage which was, let me say, ineffective for reasons other than those presently in question, but the money is paid in the ordinary course of events without there ever being resort to the mortgage. If one goes back to the first bullet point in paragraph 35, in our submission that is to identify something which is not the loss to which the relevant provisions are applying. Your Honours, I was going to go then to paragraphs 36 to 41 where one sees a discussion of the matter by the Court of Appeal

Could I submit that there are some difficulties with the approach taken by the Court of Appeal? First of all, your Honours, in particular in relation to paragraphs 39 and 40, the proposition which is put is essentially that at the bottom of page 865, halfway through paragraph 40:

Where the claim is for economic loss because the tortfeasor’s act or omission caused harm to an economic interest, the loss is also not simply a financial detriment. Just as it is necessary to identify the plaintiff’s injury in a case of personal injury, or the property and the harm to it if the claim were for damages for harm to an interest in property, it is necessary to identify the economic interest and the harm to it.

That approach, your Honours, is one that then is developed in paragraph 41 and your Honours will see it is said in the first sentence that:

the economic interest should not be identified at the general level of not being financially worse off.

Could I just say that if one makes the assumption about a need to identify economic interest in some fashion, that is no doubt correct. But, your Honours, we would submit that if one looks at the first few sentences of paragraph 41 and looks at those sentences in the light of what has gone before, it is very difficult to see, with respect, what relationship that bears to the words of the provisions in question, because the words of the provisions in question, if one goes back to section 34(2), what is required is to identify what is the loss that is the subject of the claim.

Now, your Honours, that is a question which of course has to be answered by reference to legal criteria but, if one is looking at a case such as this, it is not a case of simply saying someone is financially worse off. There is a close connection between the two activities in question and the loss, we would submit, fairly obviously is that of a lender which is by reason of the conduct of the concurrent wrongdoers, a person which is suffering economic loss because of inability to recover money which it has paid out. It is difficult, we would submit, to arrive at a – I am sorry, I might start again.

If one posits the test of there having to be an economic interest then that makes – that, your Honours, ones asks why, why not ask simply the statutory question, what is the loss? If one does that, one does not then get into questions such as those in the second sentence of paragraph 41, merging “loss or damage with damages”, and “identification of the loss or damage where there is harm to an interest in property”.

KIEFEL J: Can I interrupt you there? Does the Court of Appeal actually identify the different economic interests, or is it just identify different losses?

MR JACKSON: Your Honour, we say “no”. Our learned friends may say differently, and I suppose there are words that one can transform into saying, this is what they must have meant, but we would submit that they do not. Your Honours, the - - -

HAYNE J: Can I stay with the Act a moment and with 34(2)? The last phrase is, “the damage or loss that is the subject of the claim”. The content that is to be given to that, or may the content that is to be given to that, be identified by (1)(a)?

MR JACKSON: (1)(a), your Honour?

HAYNE J: Section (1)(a), yes. Is there any other way in which content can be given to that?

MR JACKSON: Well, the answer, in our submission, your Honour, seems to be “no”. I say that because it speaks of “the damage or loss that is the subject of the claim”, and then in the opening words of (2) it says “concurrent wrongdoer, in relation to a claim”. Now, when one is speaking of claims, the opening words of 34(1) speak of the Act applying to the following claims, and that means the claim which is the apportionable claim.

HAYNE J: Which is the claim for economic loss in an action for damages of a particular kind?

MR JACKSON: Yes. Now, your Honour, the - - -

HAYNE J: Which has no textual footing for the injection of notions of what economic interest is at stake?

MR JACKSON: Your Honour, I accept that, and that is what I was seeking to put in a way by saying that the approach taken in those paragraphs, 39, 40 and the opening part of 41, is really to add a concept that the statute does not provide for. I should add, your Honour, that when 34(2) speaks of “the damage or loss that is the subject of the claim”, one would expect it to be speaking of damage or loss that is recoverable, of course, recoverable at law. But making that assumption, it does seem to be speaking of the matters referred to in that claim.

GAGELER J: Mr Jackson, while we are looking at section 34(2), is there any limitation on the nature of the acts or omissions of the other person that is being referred to in that section?

MR JACKSON: Your Honour, I think the answer is no, and the reason why I say that is your Honour will see section 34(3) it speaks of:

apportionable claims are limited to those claims specified in subsection (1).

If one goes back to subsection (1), leaving aside the particular things in 34(1)(b), you will see that it speaks of claims which are:

for economic loss or damage to property in an action for damages –

Then it says:

(whether in contract, tort or otherwise) –

That seems to be the ambit of it, your Honour.

GAGELER J: Yes. So on your argument, what is it that stops the defaulting borrower creating a situation where there is a concurrent wrongdoer?

MR JACKSON: Well, your Honour, if one is speaking about the apportionable claim being a claim for damages against (a), and in what your Honour is putting to me I assume that your Honour is talking about the apportionable claim being a claim against someone say in our position or for negligence in drawing the mortgage.

GAGELER J: Yes. The lender only seeks recourse to the mortgage, we will assume, because of the default of the borrower. What is it that stops the default of the borrower being causally related to the loss, if we accept your submissions?

MR JACKSON: Your Honour, there is nothing that stops it being causally related to the loss. It is, in a sense, the occasion giving rise to the loss, because in the ordinary course of events one – in the absence of non-payment one would not be going for the mortgage at all. But, your Honour - - -

GAGELER J: What is it that distinguishes that case from this case?

MR JACKSON: Your Honour, what distinguishes it is that – your Honour, I am not sure I am quite at one with your Honour about what – but I assume what your Honour is putting to me is if you take the case of a borrower who has given a mortgage but defaults, but the mortgage turns out to be no good because of some negligence - - -

GAGELER J: I take that case, yes.

MR JACKSON: Well now, in those circumstances, what you have is a claim against the person drawing the mortgage, which would seem to fall within section 34(1)(a) and be an apportionable claim. But, your Honour, there would have to be a concurrent wrongdoer and, in our submission, it would not be appropriate to describe – and I give two reasons for this – it would not be appropriate to describe the borrower in that case as being a person whose acts or omissions cause the damage or loss. The expression “damage or loss”, in our submission, is not particularly appropriate to simply not paying a debt. I appreciate the word “contract” is used in determining what is the apportionable claim.

But if one has the case of someone just not paying a debt, in our submission, that is not something one would ordinarily describe as damage in the context of damage or economic loss. The other thing we say about it, your Honour, and one is always a little reluctant to give meaning to a definition by the words “defined” and perhaps “vice versa” – sorry, to give meaning to words defined by the defining term is that the expression used and being defined is concurrent wrongdoer, in relation to a claim and that is a phrase that is difficult, your Honour, we would submit to relate to a person who is simply not paying a debt. One would not describe them as a wrongdoer in the ordinary course of events, in our submission.

HAYNE J: I think that might/might not engage considerations of the kind looked at in Young v Queensland Trustees [1956] HCA 51; 99 CLR 560, where I think – it was a long time ago, but I think that that stands for the proposition that the action in debt was the appropriate action, not an action for damages. It is not breach of contract, et cetera, but as I say, the purchaser should make his own inquiries, Mr Jackson.

MR JACKSON: Yes.

FRENCH CJ: The concurrent wrongdoer does not have to be a person against whom an action will lie.

MR JACKSON: Will lie, or lies, your Honour?

FRENCH CJ: It does not have to a person against whom an action will lie, it just has to be a person who has caused the loss or damage.

MR JACKSON: Yes, I think that is so, your Honour. Your Honour will see, however, if one goes to section 35, one sees in section 35(3)(b) that the wrongdoer does not have to be a party to the proceedings - - -

FRENCH CJ: No. It does not even have to exist, actually. If you go back to section 34(4), “has ceased to exist”.

MR JACKSON: Yes, your Honour, that is - - -

FRENCH CJ: The deregistered company, is it not?

MR JACKSON: - - - giving really a hypothetical situation where the person no longer exists, but would have been a concurrent wrongdoer at the relevant time.

KIEFEL J: I suppose the other point possibly, Mr Jackson, is that the apportionable claim under section 34(1)(a) is a claim relevantly for economic loss in an action for damages, not for debt.

MR JACKSON: Yes, your Honour, that is so. It is an action for damages that is being spoken about. Your Honours, could I go back to paragraph 41 at page 866?

KIEFEL J: Might I ask you about paragraph 41? Is that where you see the reasoning of the Court of Appeal, the key to it?

MR JACKSON: Yes, your Honour, that is the heart of it. Your Honours, going back to paragraph 41, if I may, if one goes to the terms of paragraph 41 what your Honours will see is that in the last sentence of paragraph 41 it is said the losses are “different”. But it is difficult, in our submission, to tie that up with the sentences which precede it because your Honours will see halfway down the paragraph after the reference to “different interests” it is said:

Mitchell Morgan could be fraudulently induced to pay out money. It could protect itself and avoid losing the money if it obtained adequate and enforceable security.

So, your Honours, the way in which it is expressed by the Court of Appeal itself seems to recognise the connection between the two aspects of the loss, or the two ways of arriving at the loss. Those passages show that the loss was really the inability to recover the money. Your Honours, the use in the fifth line of paragraph 41 of the phrase “different interests” is not further explained by their Honours, nor is the use of the term “different” in relation to losses in the last sentence. If one goes on to paragraph 44, in paragraph 44 your Honours will see – this is at page 867 – that it said that:

The acts or omissions of Messrs Caradonna and Flammia did not cause that harm –

that is, not having the benefit of security over the Enmore property. However, a necessary step to reliance on the security was the fact that the amount lent was not recoverable from Vella personally, and it was not recoverable because of the fraud of Caradonna and Flammia.

Could I go back, your Honours, to paragraph 41 for a moment? We would adopt in relation to it the submissions which are encapsulated in our reply in the special leave proceedings which related originally to both of them, but it is paragraph 10 at pages 934 to 935 and, your Honours, in particular paragraphs (a) to (c) at the top of page 935, being part of paragraph 10.

FRENCH CJ: That might be a convenient moment, Mr Jackson. The Court will adjourn until 2.15.

AT 12.48 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.17 PM:

FRENCH CJ: Yes, Mr Jackson.

MR JACKSON: Thank you, your Honours. Your Honours, may I just deal very briefly with some matters that were raised this morning. Your Honour the Chief Justice asked for a reference to the judgment of Justice Sackville sitting in the New South Wales Court of Appeal about dealing with the type of mortgage and what it might secure. You will see it referred to, your Honours, in paragraph 27 of our written submissions, that is Perpetual Trustees Victoria v English. The reference to it is in footnote 4.

FRENCH CJ: Thank you.

MR JACKSON: The second matter, your Honours, was your Honour the Chief Justice raised the question of circumstances where the security might be insufficient and we would refer to in effect the second half, I think, of paragraph 69 of our submissions in-chief, and I am about to come in just a moment to Mahony v J Kruschich (Demolitions) in relation to that aspect. Your Honour Justice Gageler asked about debt and damage and so on. Could we refer to paragraph 55 of our submissions in-chief, and your Honour Justice Hayne mentioned Young v Queensland Trustees [1956] HCA 51; 99 CLR 560, the relevant passages at pages 567 and 569 which indicate that the claim for money owed is money owed on the contract to the claim for damages.

HAYNE J: The debt.

MR JACKSON: I am sorry, claim for the debt, your Honour. I was worried about your Honour’s reference to bearing gifts, in view of the nationality of my learned junior’s ancestors. Your Honour the Chief Justice asked a question whether there had to be a cause of action which was the position in relation to the person who is a concurrent wrongdoer. We accepted that there had to be in our written submissions in paragraphs 43 and 44. In our submission, it does seem, with respect, the better view of the provisions because otherwise there would not seem to be much point in reducing the liability of the only person against whom there would be a cause of action.

FRENCH CJ: But are we concerned in this case only with – and maybe you have already covered this in what you have put – only with the causal connection between the concurrent wrongdoer, in this case the two individuals, and the loss suffered by the plaintiff, however that is characterised. There has been a bit of focus on the loss attributable to the defendant and the loss attributable to the individuals as though they were different things by reference to the particular causes of action.

MR JACKSON: There has been, your Honour. In the end the question is one of identifying that there is a similarity of loss.

FRENCH CJ: If one gets to the point of having an ineffective mortgage - now, whether the ineffective mortgage or the inability to recover that arises because it is ineffective is defined as the loss or some other definition of the loss you say that the concurrent wrongdoers, that is to say the individuals, are part of the causal chain that is necessary to that mortgage being effective.

MR JACKSON: Well, we say - - -

FRENCH CJ: It is ineffective because the loan which it secured was unrecoverable and therefore it had to be discharged.

MR JACKSON: Yes, your Honour, we really put it, I suppose, in two different ways. Factually we say what your Honour has just put to me, but also it is a case where let it be assumed that there was some tort, to make it simple, leading to the grant of the – leading to the advance of the money and the loan and some quite separate, as it were, tort in relation to the mortgage, the loss would yet be the same and without there being any need to intersect the steps on the way. But in fact there is the intersection of the steps on the way here in any event.

KIEFEL J: Well, not so much an intersection as a chain of points at which loss could have arisen that did not because there was the potential for the mortgage and then, as you have pointed out earlier, the loss actually occurs only at the point where the moneys can no longer be recovered.

MR JACKSON: Yes. Your Honours, those are the four points I wanted to mention before moving on. The point to which I wished to go was the decision of the Court, to which I referred a few moments ago, of Mahony v J Kruschich (Demolitions) [1985] HCA 37; (1985) 156 CLR 522, which recognises of course that successive torts may yet cause the same loss. Your Honours will see that referred to in the judgment of five Justices about just after halfway down the page where it is said - - -

HAYNE J: Sorry, which page?

MR JACKSON: I am sorry, 527, your Honour.

HAYNE J: Thank you.

MR JACKSON: It is in the paragraph commencing with the word “Dillingham”, and then halfway through that paragraph:

Damages are awarded as compensation for each item or aspect of the damage suffered by a plaintiff, so that a single sum is awarded in respect of all the foreseeable consequences of the defendant's tortious act or omission. But concurrent tortfeasors whose negligent acts or omissions occur successively rather than simultaneously may both be liable for the same damage, being a foreseeable consequence of both torts, although one is liable for some only of the damage for which the other is liable and an award of damages against the one would necessarily be less than an award of damages against the other.

FRENCH CJ: That is a premise of section 5 of the Law Reform (Miscellaneous Provisions) Act, is it not?

MR JACKSON: Yes, I think so yes, your Honour. Your Honour, there are two aspects to it really that several tortfeasors may be liable under this question of contribution for each, but, of course, the each is only liable for the loss or damage caused by that tortfeasor. Your Honour, could we refer also to March v Stramare [1991] HCA 12; (1991) 171 CLR 506, to put it shortly. I wanted to refer to page 514 and your Honours will see there Chief Justice Mason in the last paragraph on page 514 referred to the fact that:

the law’s recognition that concurrent or successive tortious acts may each amount to a cause of the injuries sustained by a plaintiff is reflected in the proposition that it is for the plaintiff to establish that his or her injuries are “caused or materially contributed to” by the defendant’s wrongful conduct –

Your Honour, his Honour’s reasons were agreed in by Justices Toohey and Gaudron and you will see to the same effect is Justice Deane at page 521 in about the last 12 lines on that page. Your Honours, I am just about to go to the decision of the Victorian Court of Appeal in Quinerts, which was relied upon, but before doing that could I just take your Honours to our written submissions in-chief for a moment and to paragraphs 43 to 52 and I just wish to point to three matters there.

Your Honours, in paragraph 44 we submit that the relevant test is material contribution, for present purposes. The second point is in paragraphs 46 and 47 where we refer to the fact that the liability of concurrent wrongdoers may be joint and several. The third, your Honours, is paragraphs 49 and 50.

In paragraph 49 we submit that the question of contribution could only be answered yes and for the mortgage to be ineffective it had to be that the loan agreement was void and that the mortgage instrument did not itself contain the debt covenant but did so by reference to the loan agreement. As we submit in paragraph 50, your Honours, we were responsible for (b) but Caradonna and Flammia were responsible for (a) – 49(a) – and both were necessary for the mortgage to be ineffective and for the loss to be suffered.

Your Honours, could I move from that to the decision of the Victorian Court of Appeal in St George Bank Ltd v Quinerts [2009] VSCA 245; (2009) 25 VR 666. I will come to it in a little more detail in a moment but could I just say that we have dealt with Quinerts in our written submissions in paragraphs 53 to73 but may I deal with a number of aspects of it orally.

Your Honours will see the background to Quinerts we have set out in our written submissions in paragraph 53. The nature of the case your Honours will see set out there, the negligent valuer sought to invoke the proportionate liability provisions saying that the borrower and guarantor were concurrent wrongdoers. Now, it was held in Quinerts at paragraph 76 of that decision, which is at page 687 of the report, that neither:

the borrower or the guarantor in this case could be said to have caused or be liable for “the same damage” as [the valuer] Quinerts.

As we have said in our written submissions in paragraph 55, to which I think I referred a little earlier this afternoon, that result might have been supported on the basis that one obligation was debt and its non-payment not giving rise to damage or loss in the sense referred to in the statute. If one goes then to paragraph 76 after the conclusion which appears in the first five lines of paragraph 76, which are on page 687, and going on to the top of page 688. Your Honours will see that one of the ways in which the conclusion was arrived at appears at the bottom of 687 – or the way – it was said that:

The loss or damage caused by the borrower and the guarantor was their failure to repay the loan. Nothing which Quinerts did or failed to do caused the borrower or the lender to fail to repay the loan. The damage caused by Quinerts was to cause the bank to accept inadequate security from which to recover the amount of the loan. Nothing which the borrower or the lender did or failed to do caused the bank to accept inadequate security for the loan.

Your Honours, that approach, in our submission, is not correct, and in our written submissions in paragraph 57 and 58, your Honours, the submission which we would make, in effect, is that there is no requirement in the legislation for one concurrent wrongdoer to contribute to the breach of the other. The approach of Justice Nettle adds another, or adds an additional, non-statutory element, and it does not give sufficient weight to the fact that one is speaking relevantly of several wrongdoers as distinct from joint wrongdoers.

Could we also submit, your Honours, that his Honour’s identification of the loss or damage, in our submission, was not correct? The loss or damage was not the failure to repay the loan, but even if it were, your Honours, that is a very different case from that in the present case against Caradonna and Flammia. Could we refer your Honours to what we have said also in paragraph 59 where we submit the nature of the damage or loss and the fact that neither the borrower nor the lender participated was irrelevant?

Could I go back, your Honours, again to paragraph 76 in Quinerts and your Honours will see that in the last six lines of that paragraph his Honour’s observations refer to “the need to estimate the damage” and so on? Well, your Honours, so be it in that case, but the passage which we have submitted earlier from the Court’s judgment in Mahony 156 CLR 527 does contain a very clear recognition of the fact that in the case of separate tortfeasors there may be liability for the same damage although each may not be liable for the whole of the damage.

Now, your Honours, could I go then to paragraph 82 of the judgment in Quinerts? His Honour in preceding paragraphs had referred to what may or may not have been an apt analogy about the failure of the bulletproof vest. Your Honour, leaving aside observations of that kind, at paragraph 82 his Honour referred to an analogy of negligence by insurance brokers and your Honours will see in paragraph 83 that he applied that analogy to this case. Your Honours will have seen that when I say “to this case” the judgment at first instance had been given and was referred to the Victorian Court of Appeal and, of course, the Court of Appeal dealt with it.

But could we just say that if one looks at the analogy that is set out in paragraph 82, whilst the result arrived at in paragraph 82 may be correct in a case having those facts, the analogy of insurance brokers is, with respect, imperfect. It is imperfect because, as we have said in our written submissions at paragraph 64, insurance as such is a matter which is res inter alios acta and it does not go to contribution to loss in the relevant sense. Rather it is to indemnify against loss, once loss has been ascertained and, if necessary, quantified. Also, with insurance the insurer stands in the shoes of the insured, the right being one of subrogation.

Now, I am quite conscious in submitting that, your Honours, that the analogy that was selected was one dealing with the position of the insurance broker, as distinct from the insurer. So that is why we submit that the answer may be correct in 82, but we would submit that it is not correct to apply it as was done at paragraph 83 to this case. Your Honours, it is not correct, in our submission, for the reasons which we have set out in our written submissions at paragraphs 62 to 73 and may I make three comments about those?

The first concerns what is set out in paragraphs 62 to 65 and that is the underlying differences. Your Honours, we set them out there. I will not go into them in detail. The second, your Honours, is this. In paragraphs 66 to 67 of our written submissions there was a requirement that the judge had applied in paragraph – I am sorry, your Honour, when I say the judge I mean Justice Nettle – the requirement that had been applied in paragraph 83 that there be some identity of acts and if one goes to paragraph 83 one sees, for example, halfway through the paragraph:

Nothing done or omitted to be done by fraudster caused the solicitors to fail to draw the mortgage so that upon registration the mortgage was rendered effective despite the fraud.

Then, your Honours, in the fifth line of the paragraph –

Nothing done or omitted to be done by Permanent Mortgages’ solicitors caused . . .

His Honour had the name wrong, but it is the present respondent –

to believe that the mortgage was genuine.

Your Honours, that requirement, in our submission, is inappropriate and we refer to that in paragraphs 66 and 67. Your Honours, the last matter is a matter to which I referred earlier, and that is in the last part of our paragraph 69, the assumed need for identity in the quantification of damage. Now, could I then go to say that, if I could take your Honours to our written submissions, paragraph 70, the fifth line, we would submit that once a defendant establishes that the plaintiff’s claim against them is an “apportionable claim” the next step is to determine the identity of the “damage or loss the subject of the claim”.

Your Honours, the lack of identity, we would submit, in this case was simply asserted by reference to what was said to be the identity in each case. That goes through, your Honours, to paragraph 73. Could I refer also to what is in paragraph 77 of our written submissions. It will very often be possible where the liability of wrongdoers arises because of different acts or omissions to describe the loss or damage flowing from it in different terms, and at differing levels of generality.

Your Honours, one has to look at it as a matter of substance, we would submit, rather than form, and it is difficult to discern from the Court of Appeal’s reasons why the loss said to flow from the acts and omissions of our client differed from that flowing from the conduct of Caradonna and Flammia.

BELL J: Just before you leave Quinerts, you touch on some of the reasoning in your paragraph 54 in relation to the view taken by the Court of Appeal of Victoria that “the damage or loss the subject of the claim” for the purpose of the proportionate liability provisions mirrored “the same damage” in the Victorian equivalent to the New South Wales contribution provisions. It is not quite clear to me what your submission is respecting the significance, if any, of the relationship between contribution under the Miscellaneous Provisions Act and the proportionate liability provisions.

MR JACKSON: Your Honour, I do not know that we were in paragraph 54 attempting to draw a distinction, but rather simply reciting what the - - -

BELL J: Yes, I was not suggesting you were, Mr Jackson. I wanted to know if you do.

MR JACKSON: Your Honour, the position would be that if one has a case to which the proportionate liability provisions are apposite, then what is arrived at is in terms of section 35(1)(a) a determination of the limitation of the liability of a concurrent wrongdoer to the amount of the proportion of the damage or loss that the court considers just having regard to the extent of the responsibility for that loss. Your Honours, that is language which seems to be very close to the language used in the Law Reform (Miscellaneous Provisions) Act.

BELL J: Yes.

MR JACKSON: And one would expect in a case in which the parties were all present to arrive at a result whereby each of the parties was liable only to the proportion found in that. However, if one were dealing with the law reform provisions by themselves and not all the parties were involved, then one does have a situation I think where there has to be 100 per cent of the people present – of the parties present. So that one could have a situation where someone was found 50 per cent liable as between them but, on the other hand, you have got the proportionate liability provision which might arrive at a different provision.

But, your Honours, you will see then in section 36 that there is a limit on the amount of contribution that may be allowed, and the limit is one that applies when there has been a judgment in respect to the apportionable claim. So that is the way in which they try to work the two together. So that it would be to the advantage of a tortfeasor to have the apportionable claim issue determined usually before the contribution issue, although they may well be determined in the same action.

GAGELER J: Mr Jackson, perhaps just a follow up question along the same lines. Paragraph 68 of Justice Nettle’s judgment has a statement:

I conclude that the “loss or damage that is the subject of the claim” in s 24AH has the same meaning as “the same damage” in s 23B.

It is not clear to me whether you accept that or dispute that.

MR JACKSON: Well, your Honour, I do not think we dispute it in these proceedings. I am sorry to give that slightly qualified answer. The issue does not really – is not one I think that affects us further. There may be cases where in some way the terms used in – and I say it by way of caution really – the term used in 35(1)(a) in terms of looking at the extent of responsibility is similar to the law reform provision and the expression “economic loss or damage to property” in an action for damages, whether in tort contract or otherwise, would I think pick up the language of the New South Wales provision as it is now. There is no particular reason, your Honour, why we would say it is different, but I would just leave open the possibility there may be.

Now, your Honours, the last aspect with which I wanted to deal on the appeal was this: if one goes to our written submissions at paragraph 30, you will see that we submit that the task of the court is relevantly to identify the damage or loss that was the subject of the claim and then whether the acts or omissions of the alleged concurrent wrongdoer caused that damage or loss. Now, our learned friend’s written submissions – if I could go to that, your Honours – in paragraph 17, they say that they agree that the task presented is to identify those two things, but then they go on to say in paragraph 18 that there is a third question which needs answering and that is whether the damage is the same as that caused by the alleged concurrent wrongdoer.

We would seek to say two things about that, your Honours. The first is what we have said in our reply submissions in paragraph 3, that the third step really is superfluous because if the wrongful acts or omissions caused the damage or loss then, on the one hand, we are liable and Caradonna and Flammia, on the other, are liable in respect of the same damage. The thing, your Honours, it would logically follow that we are both liable for the same damage. The second thing we would say, though, your Honours, is that to the extent that the third test that is suggested asks a different question from the second it is adding a requirement not found in the statute. In Quinerts [2009] 25 VR at page 685, paragraph 69, the court there referred to a three-staged test which had been referred to by Lord Bingham in the Royal Brompton Hospital Case which is referred to at the start of that paragraph, and the test here referred to was in relation to claims for contribution where he said that the following questions had to be answered:

(1) What damage has A suffered? (2) Is B Liable to A in respect of that damage? (3) Is C also liable to A in respect of that damage or some of it?”

Now, your Honours, the three-stage test which our learned friends contend for, however, is not the three-stage test which is referred to in Royal Brompton. The first two questions in the Royal Brompton test are the subject of the first question we have proposed. The third question in Royal Brompton is the same as our second question, but the third step that our learned friends seek to refer to is not required by that three-stage test.

Now, your Honours, those are the submissions which we wish to make on the appeal, and may I come to the application for special leave to appeal? In relation to that, the application concerns the order made in respect of interest payable by the applicant on the amount in question. It is, your Honours, we say immediately, a visitation case, but it is a case, in our submission, with respect, on which the Court ought to pay a visit.

Your Honours, the primary judge dealt with the question in volume 2 at page 763, paragraphs 685 through to 694. You will see at paragraph 685 at page 763 in volume 2 that his Honour said that the evidence was the respondent:

borrowed at 17% in order to make the advance. It claims interest at the rate it charged under the mortgage (78% per annum, reduced to 54% for prompt payment) or 17%.

I can see no justification at all for allowing the rate under the mortgage, particularly as the loan was only for two months and at a very high rate of interest, even though Hunt & Hunt would have known these figures.

His Honour went on to say in paragraph 688:

there is only slender evidence of this claim –

and, your Honours, if one goes on to I think really paragraph 693 and 694 his Honour said:

In my view the applicable interest rate is the rate under s 100 of the Civil Procedure Act 2005.

Your Honours will also see, if I could go back to paragraph 692, that his Honour said they had “not paid off the loan” to themselves, and so on. Now, may I just say, the result of what his Honour did was to order interest under the Civil Procedure Act rates from the time the money was paid out by the respondent until the date when an auction of the property might have occurred. After that, interest was otherwise payable at the Civil Procedure Act.

The Court of Appeal at page 892 dealt with it in its second judgment and there were various submissions made but the important matters can be seen, first of all, paragraph 14, page 896 where it was held that:

the date of the cancelled auction is the appropriate date –

for the interest to finish. Then at paragraph 16 the Court of Appeal rejected a contention “based upon s 5D of the Civil Liability Act”. Could I take your Honours to section 5D of the Civil Liability Act and there are two parts of it which are relevant. The first is section 5D(1), which says that:

A determination that negligence caused particular harm comprises the following elements –

Then you will see “factual causation” in (a) and –

(b) that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused –

Now, in relation to that second requirement your Honours will see subsection (4) and subsection (4) says:

For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

Now, your Honours, the submissions which we make are set out in our written submissions, first of all paragraphs 87 to 90. Your Honours will see in paragraph 87 that we accept that if the mortgage had been drafted non-negligently, then if as a matter of fact it could have been enforced against the property it would have extracted not only the loan advance, but contractual interest up to the date of the sale.

Now, your Honours, so far as section 5D is concerned we would refer to what we have set out in paragraphs 92 to 98. In paragraph 92 we accept the scope of liability included protecting the advance which they made. But your Honours will see then that we say in the third line of paragraph 92 that we would submit there is something repugnant in awarding as compensatory damages a sum to represent the interest that would have been recovered in respect of a fraudulent loan from the property of an innocent third party, in circumstances where the defrauded mortgagor

would, by the nature of the fraud, likely discover it, as Mr Vella did, well after the loan was in default and attracting in substance what was penal interest, and at interest rates may times those of commercial lenders.

Your Honours will see in paragraph 93 we record the primary judge’s view that they did not make proper inquiries. We then make the submissions which your Honours will see in paragraphs 94 and 95. Could I just say one thing about paragraph 96, your Honours? The provision to which we refer there is a provision which was not in force at the time of the relevant transactions. It came in force in 2009 and I think the way in which we have it there, if I had not added that, might be misleading. So, your Honours, we would make the submissions set out then in paragraphs 97 and 98.

Your Honours, in terms of the relief that we would seek in the matter, if we were successful in the proceedings on the appeal, the appropriate result would be that to which we have referred in paragraph 102 of our submissions in-chief, in terms of allowing the appeal and setting aside the orders of the Court of Appeal and ordering that the appeal to the Court of Appeal be dismissed with costs. If we were only successful on the special leave point, there would need to be a grant of special leave, and the grant of special leave would set aside, in effect, the second judgment of the Court of Appeal, otherwise the judgment of the primary judge would remain.

FRENCH CJ: Thank you, Mr Jackson. Yes, Mr Coles.

MR COLES: If your Honours please.

FRENCH CJ: Can I just repeat something I said yesterday, Mr Coles, in your absence that with these oral outlines, three pages of close print is not very helpful.

MR COLES: Probably not.

FRENCH CJ: A dot-pointed road map is much more useful, I think.

MR COLES: I think, your Honour, I will perhaps bypass quite a bit of what appears in the densely-packed three pages your Honours have and perhaps come to deal more directly with the various points that Mr Jackson has raised.

HAYNE J: Which was the intention of bringing in the direction about the three-point summary, if we could get it reduced.

MR COLES: Your Honours have been taken extensively to the statutory provisions. I would not want either to unnecessarily repeat them or, by failing to refer to them, overlook or suggest that close attention to their textual requirements is not essential for the present issue because, as your Honours have already noted, one is looking at the question of the liability of Hunt & Hunt being reduced on its assertion that it is a concurrent wrongdoer in relation to the claim against it with others and seeking to have that liability limited by the proportion described in the statute.

The importance then of recognising what the claim against Hunt & Hunt is, of course, arises because one is looking at a claim – it is defined as an apportionable claim, but that definition does not of course dictate its apportionability as between others. That is merely the definition of the claim. The claims concerned are those for economic loss in an action for damages arising from failure to take reasonable care, or for economic loss arising in effect from misleading or deceptive conduct.

So one is looking at the position of a defendant in relation to a claim for economic loss in this case arising out of a failure to take reasonable care, and then when that defendant says, “I am a concurrent wrongdoer with others”, in the first instance of course that defendant must identify the other person or persons or someone else who, in relation to a claim, that being the claim against the section 35 defendant, is a person or one or more of a number of persons who have caused the damage or loss that is the subject of the claim. One needs conceptually of course to add in after the expression “the damage or loss” here – here, I agree, the loss, that is, the subject of the claim – be understanding that it means the subject of the claim against the section 35 defendant, being the claim for economic loss arising from that named defendant’s failure to take reasonable care.

It does seem to be the case, your Honour, at least for the purposes for these proceedings, but certainly was I think, your Honour, before the Court of Appeal, the case that the expression “loss or damage . . . the subject of the claim” is to be equated with the concept or the statutory expression, the same loss or damage, which is described in the contribution legislation. Your Honours will see, by the way, at paragraph 70 of the Court of Appeal’s judgment at appeal book 878 that their Honours there record that it was not contested by Hunt & Hunt in the Court of Appeal that one was looking at the same loss or damage which is the subject of the claim against Hunt & Hunt in relation to the claim made against that defendant.

So one understands the loss, relevantly, that is the subject for the claim against Hunt & Hunt for damages for failure to take reasonable care, in this case in relation to the drafting of a mortgage. It must be shown, therefore, that the identified concurrent wrongdoer was someone who caused that loss or some of that loss in order to activate the proportioning exercise which section 35 demands.

HAYNE J: How much of the preamble before that loss is essential? You described it as a loss sustained by reason of the negligent provision of an ineffective mortgage.

MR COLES: Yes, that is the claim against the – yes.

HAYNE J: Is not the relevant claim the claim as framed by the plaintiff?

MR COLES: Yes.

HAYNE J: And the relevant aspect of the claim as framed by the plaintiff is the plaintiff’s claimed loss, full stop.

MR COLES: Yes.

HAYNE J: Why do we need, then, to attach to that any reference to how Hunt & Hunt are alleged to have contributed to the occurrence of the loss which is the subject of the action for damages?

MR COLES: Really what is necessary is that the loss be identified and there are various approaches, techniques or tests for that identification, but I suppose one way one could identify the loss – or perhaps a starting point is to look at the plaintiff’s claim and say, “Well, how did the plaintiff identify the loss?” Here it identified the loss in terms of the respective causes of action in contract and in tort relating to the preparation of the mortgage.

HAYNE J: It did not identify the loss in terms of the cause of action. It identified causes of action as a foundation for recovering damages for the loss which it identified.

MR COLES: I do not disagree with your Honour. The question is, if – and our learned friends put it perhaps – well, they certainly put it in different ways. Can I deal with what we think is the first way the appellants describe or submit the relevant loss or damage comprises? It seems the appellants submit that the first and second respondents’ loss or damage, the subject of the claim against Hunt & Hunt for the economic loss arising out of their failure to take reasonable care, is the inability on the part of the first and second respondents to recoup the moneys advanced from the realisation of the security adopting in connection with whether a valid mortgage – or adopting the observations of Justice Gaudron.

One might say in the context of a mortgage in this case that loss perhaps may be described as the failure on the part of the respondents to receive an enforceable valuable security interest, the exercise of rights under which would enable recoupment of the principal and interest, including in the event of fraud. Now, if that is the loss then the question – if that is, as perhaps our learned friends are inclined to accept, if that is the loss then that may seem to reduce the question in the appeal to whether or not it can be said that Caradonna and Flammia were persons whose acts or omissions caused that loss; that is to say, the loss of the registered interest which was a charge on the land, the attributes of which were the entitlement to exercise statutory rights, including the exercise of a power of sale available even if the mortgagees had been duped out of their money by someone else’s fraud.

FRENCH CJ: Do you accept that if they were a sine qua non of the loss then they fall within the scope of concurrent wrongdoers - - -

MR COLES: If they were simply people whose role was to contribute to the general calamity, yes, of course; they set it all up. Here, once one identifies, in our respectful submission – and perhaps I am only paraphrasing what the Court of Appeal held – if one accepts that the relevant loss was the loss of the security interest with the effect of being thereby unable to recoup the moneys advanced by realising the security, then, in our respectful submission, the problem necessarily arises in identifying how the fraudsters can be said to be persons whose acts or omissions caused that loss or damage, being the loss or damage which is the subject of the claim against Hunt & Hunt, and in our respectful submission, they did not.

FRENCH CJ: Do you say that by reason of the negligence the security was ineffective against the contingency and that the causal change to the contingency was distinct; that is to say, the conduct of Caradonna and Flammia?

MR COLES: Yes, that is right. We disagree that it is a case of a novus actus, we simply say it is - - -

FRENCH CJ: No, I understand, yes. You are saying it is parallel and distinct because you identify the loss at a point before logically anterior to their conduct.

MR COLES: Quite, yes. Likewise, the respondent’s negligence for that matter was not the cause of any inability to recover from Vella or let alone any inability to recover from Caradonna and Flammia who, of course, by that time were bankrupt and there was, in fact, no claim. A claim against Caradonna and Flammia would have been a claim for fraud or a claim for breach of section 42 of the Fair Trading Act as it was at the time.

FRENCH CJ: But Part 4 is not so much concerned with the causes of action, apart from the fact that there has got to be an apportionable claim, it is the chain of causation, is it not?

MR COLES: Yes, we would think so, your Honour. Can I deal then with - - -

KIEFEL J: Just before you do, could I just ask you this? At what point do you say that the loss or damage was sustained?

MR COLES: In connection with the mortgage when – after the period - - -

KIEFEL J: No, when do you say Mr Vella’s loss or damage was sustained?

MR COLES: As it turned out Mr Vella did not have any loss or damage as such because he was not liable. His land was freed - - -

KIEFEL J: I am sorry, yes, I am with you.

MR COLES: - - - up from the mortgage because of the defendant’s negligence. When we suffered loss under the mortgage was that upon its expiry date the statutory powers of sale that should have been available and which, according to the Real Property Act should have been able to be acted upon, were not, and not because the mortgage was a forgery.

KIEFEL J: You do not suggest that the loss occurred for Mitchell Morgan at the point when the ineffective mortgage was taken?

MR COLES: Its loss became apparent when it was realised that - - -

KIEFEL J: It became productive of loss later on.

MR COLES: Yes, that is right, when the time when it was needed, when the interest which it protected fell to be accessed and - - -

KIEFEL J: In order to avoid loss.

MR COLES: In order to avoid loss.

KIEFEL J: So the loss must occur at a point when it is sought to recover the moneys under the mortgage?

MR COLES: Yes, we would think that is the better view, your Honour.

KIEFEL J: By that point is it not the case that the two fraudsters are also liable for the moneys that are otherwise to be recovered under the mortgage?

MR COLES: They are not liable for the moneys to be recovered under the mortgage. They may be liable in point of damages for the same amount of moneys, but they are liable simply for compensation for their fraud, which happens to equal the amounts. Not necessarily the same amount secured by the mortgage because the interest rate payable by the fraudsters under statutory interest provisions might be different to the interest rate payable under the ineffective mortgage, but that is a separate matter. But the fraudsters, there can be little controversy, were liable from the very moment the moneys went out the door. The cause of action was complete and distinct, so far as they were concerned.

KIEFEL J: They were liable, yes, but there comes a point when of course Hunt & Hunt come into the picture and then you have two tortfeasors, so the picture changes.

MR COLES: Yes, indeed, and the real question as we would see it on this basis must simply boil down to a question to which there can only be one answer, namely what did the other wrongdoers, who are claimed to be concurrent wrongdoers, what did they do which caused the loss which Hunt & Hunt’s failure to take reasonable care caused to limit the mortgagees, the respondents.

KIEFEL J: If you do characterise the loss or damage as the inability at the point we have discussed before as the inability to recover under the mortgage, would you agree that the fraudsters have contributed to the loss?

MR COLES: They have not contributed to the failure of the mortgage instrument to produce a return, no.

KIEFEL J: No, but their actions are necessary for the particular loss to be characterised in the way it is. Without their actions, there is no need to look to the mortgage. They have that necessary connection.

MR COLES: Quite. If your Honour is putting to me if there had never been a fraud, would there ever have been a loss, then of course I agree.

KIEFEL J: So we have - - -

MR COLES: But here of course we are dealing with a special situation in one sense, where there has been a fraud and where steps are taken which recognise the possibility of that very fraud, or where steps are available and ought to have been taken which recognise the very possibility or prospect of that fraud and provide a mechanism for avoiding its financial consequences, then the failure of the protective steps is the negligence of those whose responsibility it was to procure those protective steps to work. The production of the fraud, of course, is merely the mechanism for activating the very necessity for those protective steps to have operation according to their anticipated - - -

FRENCH CJ: The cause of action against Hunt & Hunt crystallises the point that damages suffered, is it not?

MR COLES: At the point the registered mortgagee is unable to exercise its statutory remedies to realise the property, yes. To recoup, as Justice Gaudron says, to recoup out of the - - -

FRENCH CJ: Yes. That is at the point at which the fraudster’s conduct gives rise to the loss intersecting with the ineffective protection of the mortgage, is it not?

MR COLES: When one comes to the situation where the relevant number of months – I think it was only a two-month mortgage – has expired, it is a very short-term mortgage which is really part of the ingredient that activated the liability finding, of course, but when the short-term period expires and the moneys are not repaid, true it is the fraudsters did not, as perhaps they could have, repaid the money, but they have not – I suppose one could say that their failure to repay the money and make themselves honest men again is part of the picture but that is not really - - -

KIEFEL J: It has set a chain of causation, has it not?

MR COLES: Yes, but it is not to do with – the only thing that causes the mortgage to be inaccessible as a protection against the fraud is not the fraudsters themselves but the fact that solicitors did not draft it in the way that would have had that effect.

HAYNE J: It was not a mortgage given by the mortgagor. Vella did not give the mortgage.

MR COLES: No, he did not, that is precisely the point.

HAYNE J: And why did not Vella give the mortgage? Because the fraudsters had done their thing.

MR COLES: That is right, and therefore, that is the very essence of the breach of the duty to take reasonable care in drafting the mortgage because in New South Wales, at least – and I think this must have been recognised at the very latest in, for example, Frazer v Walker. If you put the sum of money in the mortgage that has the effect that – whether it is forged or – well, forgery does not matter, the indefeasibility operates to protect the registered instrument which identifies the sum secured.

HAYNE J: The very premise for our debate is that Hunt & Hunt were negligent. That is a premise. It is given. Another premise is that the fraudsters were fraudsters.

MR COLES: Yes, quite, that is a given.

HAYNE J: What does pointing to the fact that things might have been different if Hunt & Hunt had not been negligent help us?

MR COLES: Well, only in the respect that had they not been negligent the fact – this is really my next point – the fraud of the fraudsters would not have mattered in the sense that there would be – the fact that they committed fraud would have no impact.

HAYNE J: Mr Coles, if things had been different, things would be different, that I can readily grasp, but we have got to apply the Act to the circumstances as they exist.

MR COLES: Yes.

HAYNE J: Now, why is this not the same loss? The case against you is that the loss is the inability to recover whether by repayment or realisation. What is the answer?

MR COLES: That is the why of the case, your Honour. I was dealing with the – perhaps I should finish what - - -

HAYNE J: No, you should take your course, not the course I want to impose on you.

MR COLES: I am sorry, your Honour. There is a short point to be made about the narrower case.

KIEFEL J: At the risk of interrupting both you and Justice Hayne’s inquiry, just on the question of the chain of causation which the fraudsters, on one view of it, have commenced, could I ask you to go to appeal book 42 which is Mitchell Morgan’s second cross-claim statement of claim, paragraph 6. This is their claim, I think, against Hunt & Hunt.

MR COLES: Let me just find that, your Honour. Yes, thank you. Yes, I see.

KIEFEL J: In paragraph 6, the claim of loss and damage:

Particulars

If the Court finds that the mortgage was procured by fraud and, further, that the mortgage is rendered defeasible in consequence of the dicta in Tsai, the Cross-Claimants loss is the sum lent, together with interest and additional expenses.

MR COLES: That was pleaded as the quantum of them, in our respectful submission.

KIEFEL J: Yes, it is, but the identification of the causes of the loss are both the procurement of the mortgage by fraud and the fact that it is rendered defeasible. Those two particulars identify the cause of the loss or damage. As you say, the latter part of it identifies the measure, but - - -

MR COLES: Yes, it is our submission that, whilst the pleading identifies the claim, it is not obviously conclusive of the statutory - - -

KIEFEL J: No, but it is strongly indicative of what is said to be the causative elements relied upon.

MR COLES: Well, it is one way of formulating it, I agree, but what we put in this appeal and what the Court of Appeal accepted was that upon closer analysis particularly focusing upon the more precise identification of the loss the subject of the claim against Hunt & Hunt, then that was not so, and the true loss was the loss of the security interest in the way that observation from Kenny & Good.

KIEFEL J: I am sorry, I have distracted you from the question that Justice Hayne put to you.

MR COLES: No, I wanted to come to the point Justice Hayne raised under the rubric of the more general way we think the appellants put their case. To put it shortly, Hunt & Hunt say that – or they pose the question what caused the mortgage to be ineffective. They really accept the proposition that the mortgage was ineffective in the way we have described it. We say it was the failure to consider and adopt the form which specified a sum and they accept that that was the basis, or a basis rather, upon which the mortgage was ineffective. But they then go on to assert an additional matter which, in our respectful submission, warrants consideration and should not be upheld.

Hunt & Hunt, as we see it, your Honours, assert that the forged loan agreement purportedly incorporated in the mortgage – and these your Honours will recall are in their written submissions to which Mr Jackson took you to at paragraphs 48 and 49. There they assert that the forged loan agreement was also a cause. This is the conduct they are attributing to the fraudsters. They are saying they forged the loan agreement, as their contribution, as we see it, to the distress occasioned. The contention is that the forged loan agreement was also a cause because the mortgage secured moneys payable under a loan agreement. Now, that is what on its terms it said it did.

But of course if the mortgage had been drafted without the failure to exercise reasonable care, which is the claim made - in relation to which the claim is made against them, then really no need at all arises to consider any loan agreement – in this case there was none – because its effect has no relevance for the reason I have described. Once one has a mortgage which simpliciter nominates the sum secured, then one’s indefeasible entitlement to recover from the land at least that identified sum, with any interest, is secured, but interest is protected by registration. So that, whether or not there is a loan agreement is simply not to the point, in our respectful submission. It is not a component of the protection that the Torrens system afforded, which was the very protection or the interest that Hunt & Hunt were retained to protect, which we lost; i.e. that is, our loss.

So that we lost the right to recover from the land or to recoup as Justice Gaudron described it, the sums of money which were identified in the mortgage as repayable. The absence, or non-existence, of a loan agreement – here, we would say, absence, it is a little artificial to refer to a void loan agreement. In reality that is a different kind of loan agreement, we would have thought. Here, there is simply no loan agreement at all.

So the mortgage was underpinned by no loan agreement at all and the forgers’ purported endeavours to create the appearance of one was of no moment whatsoever. Indeed, it was one of the very things which the retainer of Hunt & Hunt if, accurately or carefully and non-negligently pursued would have protected the mortgagee against.

Now, just before I come back to the major point that I have been discussing with Justice Hayne, it is said that that is too narrow a view, as we understand our learned friend’s submissions, but your Honours will readily appreciate and it is said that it requires that it eliminates any prospect for other than joint liability in the getting together, as it were, to produce a mortgage which was negligently prepared. That is, with respect, not right and not exhaustive of the factual situations.

Just to adopt, for example, this factual situation, it would be perfectly possible to imagine a series of persons who were, for example, involved in – I use that expression purposely – generally in the preparation of a mortgage which failed to do the job who advised successively and even, indeed, independently one or the other who might have, together or collectively, caused the mortgagee’s loss. They would in the professional liabilities sphere, not infrequently be fellow professionals.

So that, for example, one could have an in-house counsel, external solicitors and perhaps they might themselves, in a sufficiently complicated case, have briefed other counsel. They might altogether, but independently one of the other, done things which had that direct impact. There is perfect scope in the problem with which we are dealing with successive and independent wrongdoers to cause the loss. It is just that they did not here because there was only one wrongdoer who caused that particular loss.

So coming then to, I suppose, the big question, is the real question who caused as a sort of ultimate causa causans, the loss of the money or is the more immediate question – which we would suggest is the one that the statute demands an answer to – who caused the loss of the security interest, which brings me to the other way we thought the appellant was putting the case which is that the loss or damage, the subject of the claim against Hunt & Hunt for, et cetera, et cetera, I think it was described as the inability of the mortgagee to recover from each of two possible sources the money advanced.

Now, putting to one side the extent to which perhaps that might be an elusive formulation and may mean little more than just they lost the money, one has to consider these matters, in our respectful submission. Firstly, of course, the proposition – that is to say, the loss was the inability to recover from each of two possible sources the moneys that had been advanced – the proposition itself identifies that there are indeed two losses or claims for economic loss, but it also assumes that which has to be established, namely, that they are the same when in fact on analysis – and here we adopt what the Court of Appeal had to say, in both Courts of Appeal in the cases which have been referred to – here on analysis they are different, only one of which arises from the failure to take reasonable care; that is the named defendant’s loss. The other one arises from fraudulent behaviour.

The solicitors undoubtedly caused by the failure to take reasonable care one of these two losses, namely, the loss of the entitlement we have described to the registered interest with the recoupment potential which that registered interest had, including recoupment in the event of fraud. As we have been at pains to emphasise, and as the Court of Appeal held, the fraudsters simply did not cause that loss.

Indeed, the fact that there are two possible sources for recovery of the moneys outlaid, in our respectful submission, does not of itself demonstrate that the damage or loss the subject of the claim is the same in respect of each wrongdoer so that they are concurrent wrongdoers in relation to the claim. One is merely pointing to two people who had – or two sets of people who contributed in their various ways to the misfortune which beset the plaintiff. It is not of itself answering the question, the question which the statute demands an answer to, namely, whether the asserted concurrent wrongdoer then nominated someone else was a person who caused the loss or damage the subject of the claim being made against the identified defendant.

HAYNE J: Did the fraudsters cause Mitchell Morgan loss?

MR COLES: When the moneys were laid out, they did.

HAYNE J: What was the loss they caused?

MR COLES: They caused immediately the payment out of moneys – payment out by Mitchell Morgan of moneys – to people against whom there was no entitlement to exact repayment otherwise in effect a proceeding for fraudulent conduct.

HAYNE J: That is the loss was the payment out of moneys to persons from whom it could not be recovered?

MR COLES: No, that loss was the loss – exactly – what was the loss of - - -

HAYNE J: What is the difference between that loss and the loss which you sought to recover from Hunt & Hunt?

MR COLES: That is the crucial point.

HAYNE J: I agree with you so far, Mr Coles.

MR COLES: The loss sought to be recovered from Hunt & Hunt is the loss occasioned by the fact that there is no person who has to pay the money and there was, if Hunt & Hunt had done its job properly, not a person but a parcel of land, an asset that could be accessed and realised and turned into money, so that you did not need a person. You had an asset. Hunt & Hunt lost us the asset by not having a mortgage. So, that is a different loss, in our respectful submission.

One is the loss of an accessible and ready and willing person or defendant. The other is the loss of a proprietary entitlement, a registered proprietary entitlement with statutory attributes of the kind I have said. That is why it is different, in our respectful submission. That is why they are not the same loss. So, the loss, in our respectful submission, is not related to or dependent on the sources of the potential recovery. Indeed, the one factor that perhaps is relevant in evaluating that is the differences in time which we have already referred to.

Now, that in short is what we say is the answer or perhaps the inadequacy of seeking to define – and obviously, one can understand the appellants would wish to define the loss or damage that is the subject of the claim in as general or wide a terms as their submissions can sustain because it is then easier to find other people causing that loss. One could ask are they really saying no more than that in this unfortunate range of events the first respondent lost some money. Who are all the people that made the loss of money happen - everybody who had a finger in the pie, as it were.

With respect, the legislative drafting is more particular than that. It does not say that and infinitely fewer – a very considerably fewer number of words, we would suppose, could have been deployed in the statutory drafting exercise if all that it was meant to do was to call into play – or more accurately to limit a plaintiff. One bears in mind, this is far reaching legislation. It limits a plaintiff from what theretofore was a right of the general law to sue for the whole amount of the loss a particular defendant who was responsible for that loss leaving that defendant to, of course, rope in the other wrongdoers.

FRENCH CJ: Where the claim is one in negligence the loss that is the subject of the claim necessarily involves the damages – the cause of action does not accrue until that point, is that not right, until the point that damage is suffered?

MR COLES: In negligence, yes that is right.

FRENCH CJ: Its failure to take reasonable care. Is loss in that sense capable of being attached to the provision of the ineffective security, absent the contingency that the money has become irrecoverable?

MR COLES: I am not sure I entirely understand your Honour’s - - -

FRENCH CJ: I put to you before that you were saying there are really two causal chains. There is, Hunt & Hunt give you an ineffective security, ineffective against a certain contingency.

MR COLES: That is right.

FRENCH CJ: There is, the fraudsters bring the contingency to life and that means you then suffer the loss. Well, you were saying the ineffective security is the loss. That is not caused by the fraudsters, that is the contingency down the track. But, in fact, the loss that is the subject of the claim which is referred to in the definition of concurrent wrongdoer and a claim for the negligence would be beyond the point of provision of an ineffective security. It would be at the point at which the contingency had occurred, would it not?

MR COLES: In fact, in point of time, yes, but again that does not break any chain of causation or distract the - - -

FRENCH CJ: Does it not bring the fraudsters in to the loss at that point?

MR COLES: No, that is the point. It does not exonerate the original people who - - -

FRENCH CJ: It does not exonerate them, no, it is just a question of whether parallel chains of causation actually converge upon one loss.

MR COLES: No. Well, then one would have to be saying rather artificially the loss was the failure of the fraudsters to come forward at the due date with their money bags and make whole the plaintiff position. Now, that is, with respect, an artificial way and not the sort of loss that in a practical world a statute like this one would suppose is concerned with.

FRENCH CJ: I was thinking of the kind of Wardley analysis really.

MR COLES: The fact that the appreciation or the accrual of the loss when the time to realise the property as a source of payment happens, no further involvement of the fraudsters is relevant or necessary or causal of that state of affairs. They did their harm on day one.

KIEFEL J: But they do not have to be the same cause of the loss, they have to be a cause of the loss for the purpose of the statute, is that not the point?

MR COLES: Yes, I accept that, yes. But again that is the point, our submission depends on acceptance of the fact that they are not causal. They did not cause the loss of the mortgage security because that was all the work of Hunt & Hunt and they were not involved in the retainer, its performance, the due attention which accompanied its execution in life.

KIEFEL J: But I do not think you quite understood what I was just putting to you. The statute surely does not require that they be the same cause as Hunt & Hunt for the loss. It only requires that to be a concurrent wrongdoer under section 34(2) that they are a cause.

MR COLES: They cause the loss or damage, which is the same loss or damage that is the point.

KIEFEL J: Perhaps reading section 34(2) in its whole, which is that it assumes that there may be more than one cause, clearly.

MR COLES: There may be. I have accepted that in the - - -

KIEFEL J: We are not just looking necessarily at one cause, and we know that they did not in their acts or omissions cause damage in the same way. They could not have, as Hunt & Hunt, but the question is simply, is it not, whether they were a cause in the chain of causation which led to the ultimate loss and damage?

MR COLES: It would be difficult to deny that that must have been so, in a broad scheme of things, but we contend that - - -

KIEFEL J: It is not so broad. It is a chain of causation.

MR COLES: We assert that the chain of causation is related to the damage, or the loss in this case, which is the subject of the claim against Hunt & Hunt which - - -

FRENCH CJ: They are a sine qua non of the loss upon which Mitchell Morgan sue Hunt & Hunt, are they not?

MR COLES: Of course, yes. If they had never been a fraud - - -

FRENCH CJ: The loss that is the subject of the claim.

MR COLES: - - - nothing would have happened, quite, exactly. But as I say, what is important about Hunt & Hunt’s role in the matter is that their retainer of course, in effect, assumes such people are around. It took that on board. It knew that there were fraudsters out there who were going to cause loss in the way that Caradonna and Flammia caused loss, and their retainer was to draft the mortgage which, if they had done it the way the judge told them they should have, then there would have been no loss caused by failure to recoup the moneys from any particular person. The moneys would have been recouped from the secure asset that was held in reserve against that risk. I am repeating myself, your Honours. I think your Honours have the point.

HAYNE J: Well, do I understand the fundamental distinction you would have us draw is between a loss occasioned by there being no third party to whom the lender could resort – that is what the fraudsters achieved - - -

MR COLES: That is what the fraudsters achieved.

HAYNE J: - - - compared with a loss occasioned by there being no property to which the lender could resort. Is that right?

MR COLES: Yes, your Honour, in a nutshell.

HAYNE J: That is a difference in causes, is it not, not a difference in loss?

MR COLES: It is a difference in loss, in our respectful submission.

HAYNE J: Well, there is the central point, is it not?

MR COLES: That is the central point, yes. We say, your Honours, that the Court of Appeal identified that as so and there was no self-evident reason why that was wrong and, indeed, of course, you have seen our submissions in relation to St George Bank v Quinerts and we adopt the reasoning in those cases as, with respect, compelling on that question.

GAGELER J: Mr Coles, is another way of stating the question in section 34(2), on your submission, to ask if the plaintiff were to sue the fraudster, would the plaintiff be suing to recover the same damage as the plaintiff is suing to recover against Hunt & Hunt?

MR COLES: That would be the question, yes. Of course, our answer would be no, for the reasons your Honours understand – or the same loss. I think I am at one with our learned friends in probably calling it “loss” because “damage” probably refers the damage to property and “loss” probably refers to economic loss, but nothing much turns on that.

GAGELER J: That is perhaps implicitly reading the word “caused” purposively in section 34(2) to look at the link between the act or omission, and the damage or loss that is the subject of the claim. So perhaps it is not simply sine qua non for loss, but rather a causation that links a possible cause of action with the actual cause of action in the present case. Is that the way you put it?

MR COLES: Yes, indeed, I would adopt that. Now, I am conscious of the time, your Honours, and I think your Honours would be disposed to complete the matter today. Our learned friends I think appeared to make something, at least in their submissions, of the fact that it was they who notified the respondents that the mortgage had been registered. We are unable, with respect, to identify in that circumstance anything more than a communication of a fact and, indeed, perhaps confirmation of the fact that they relied on the mortgage being efficacious for the purposes for which they were retained to draft it.

HAYNE J: Well, the mortgage preceded drawdown and it might reasonably be inferred I think that registration was a condition of drawdown.

MR COLES: Indeed, this is perhaps an a fortiori example of the Torrens system in its full glory in the sense that it was not just one of those situations where at settlement you hand over a mortgage and hope for the best with the register. These people actually waited until they got the phone call and then advanced the money to the fraudsters. But that does not, with respect, drag – enable Hunt & Hunt by communicating the fact that the mortgage was registered to be able to assert that they thereby became in concurrent – in the condition of concurrent tortiousness with the fraudsters.

FRENCH CJ: That is a neologism, by the sounds of it.

MR COLES: I fear so, your Honour. Can I just seek to be economical? I think your Honour Justice Kiefel asked before lunch to our learned friends what was the Court of Appeal’s identification of the respective economic interests. On our quick overview we think that appears at least at paragraphs 41 and 80 on pages 866 in line 30 and following, and paragraph 82 in line 20 and following.

KIEFEL J: I am sorry, 41, 80 - - -

MR COLES: Paragraphs 41 and 80 in various ways and in different contexts. Now, just some incidental matters, if your Honours please, before I conclude the submissions in the appeal. In contesting the correctness, as we understood it, of the St George v Quinerts decision, our learned friend appeared to criticise it for imposing – as if it imposed a requirement that the concurrent wrongdoer should – one concurrent wrongdoer should contribute to the breach committed or omitted by the other concurrent wrongdoer. We agree there is no such requirement but we disagree that Justice Nettle, for one, insisted upon one.

The question was whether there was causation of loss, and that is whether the defaulting mortgagor caused the loss the subject of the claim against the negligent valuer and his Honour found as a matter of causation that was not the fact. It was, in our respectful submission, not to be understood as imposing any – or the reasoning involving any further requirement of contribution to the breach itself. It is contribution to the loss, not contribution to the breach, which occasioned the loss.

Our learned friends also, in their written submissions at paragraph 66 and following, disputed the, with respect, in our submission, sensible and correct analogy drawn by Justice Nettle in connection with the insurance broker who fails to obtain insurance which would protect its client against being a bank, against risks including theft. The analogy with the insurance broker which Justice Nettle drew, in our respectful submission, is a particularly good one.

With respect to our learned friends, it has nothing to do – or the criticism which seeks to draw attention to something rather different, namely, what would be the position if there were payments made by insurers – is not in point in analysing that analogy because, after all, the liability of the negligent insurance broker is to pay damages which made in the amount resemble, or accord with, the payments which the insurer might have been made but that does not translate them into the status or quality of payments made by insurers as such.

There, of course, in particular, the insurance broker in Justice Nettle’s example was liable for damages because it supplied no protection against the thief. We have difficulty, with respect, seeing why that is not a perfectly applicable analogy in the present case because we paid money to thieves and a registered mortgage would have made.....to pay the covenant consequence.

Then, lastly, your Honours, beyond observing that we, of course, rely on our written submissions and respectfully submit they are decisions both of the Court of Appeal and of the Victorian Supreme Court, Court of Appeal were correct. That is all we wish to say on the appeal. Despite the density of its textual packaging and appearance, could I just draw your Honours’ attention to paragraph 17 of the, not particularly skeletonic outline and ask your Honours to note what we say there.

On the leave application, we simply say that there is no principled way to approach the question of what is the 5D(1)(b) appropriate scope of liability suggested in our learned friend’s submissions. We point out that the inability to recoup interest under the mortgage is as much a consequence of the defendant’s failure to take reasonable care as the inability to get the money back from others. Hunt & Hunt were aware, we point out importantly, of the interest rate, so the loss was reasonably foreseeable and no error of principle has been shown and we draw attention to paragraph 16 of the second judgment at appeal book 897. Yes, that is on page 897 of the appeal book where Justice Macfarlan who gave that judgment recorded that Hunt & Hunt:

was fully aware of the terms of the loan transaction, including the interest rates payable, as it drafted the relevant Loan Agreement –

So, in our respectful submission, your Honours would not grant special leave to appeal in relation to that matter for the reason – or for any reason – and, in our respectful submission, our learned friend’s concerns about, in effect, the risk of and involving sanctioning usury really do not arise and that seems to have been something which was not part of Hunt & Hunt’s case at the trial, rather it appears in the judge’s reasons, I think at 861. The trial judge had said at appeal book volume 2, page 762 in the trial judge’s judgment, paragraph 681 records that:

Hunt & Hunt say that their damages must be calculated by working out what was the net sum that Mitchell Morgan would have received if Mitchell Morgan had retained the benefits of indefeasibility and had sold the Enmore Property.

That carries with it the recovery of, in our respectful submission, the principal and the relevant interest up to that date which is exactly what the judge said. So, in our respectful submission, no occasion for the grant of special leave arises in those circumstances. May it please the Court.

FRENCH CJ: Thank you, Mr Coles. Yes, Mr Jackson.

MR JACKSON: Actually, your Honours, in relation to what my learned friend just said that is not what the primary judge did. The primary judge did not allow interest at the rate in the mortgage from the time my learned friend referred to and that was the order that was set aside by the Court of Appeal.

Your Honours, may I come back to the appeal itself and to a few points arising from our learned friend’s submissions. May I say that we have, as your Honours will have seen, reply submissions in writing in the matter and I refer to those. Could I also say this? First of all our learned friend at the commencement of his submissions said that one could identify the loss so far as our negligence was concerned as occurring at a particular earlier point in time, namely, the time when the ineffective security was, in effect, given or provided.

Your Honours, one is talking about economic loss in the particular case. That is what the statute is referring to and in referring to economic loss, your Honours, one asks, of course, hypothetically, what else is the loss other than the inability to recover the moneys advanced? Our learned friend also referred to the mortgage being taken as one of a number of protective steps that might be taken but one asks, protect against what? Well, presumably, your Honours, presumably protect against the ability to recover the money that is lent.

Your Honour, Justice Kiefel, referred to the statement of claim in this matter, and could I go to page 42 of the first appeal book and your Honour referred to paragraph 6. But could we refer also to paragraph 10 and what your Honours will see that it said:

In the premises, the Cross-Claimants have suffered and continue to suffer loss and damage.

Presumably, your Honours, the continuing suffering of loss and damage occurs because of the continuing inability to recover the moneys advanced. Your Honours, our learned friends referred also to and said the solicitor’s negligence caused one of two losses. But, your Honours, again one is talking about economic loss and if one is looking to see what is the economic loss, why is the economic loss in each case not the inability to recover the moneys lent.

Our learned friends also, if I could move to a slightly different topic, said that we had contended, in effect, that the views taken in the court below and perhaps in the Victorian Court of Appeal had the effect of excluding liability, other than joint, and the fallaciousness of that contention of ours was said to be exposed by referring to the situation where there might be successive persons, each of whom was liable for making a mess of the mortgage in a number of stages. Well, your Honour, perhaps that is a possibility.

But it does seem to give a very narrow effect to these provisions which were intended to effect a significant change in the law, a very significant change indeed and, your Honours, if that is all they did, well, the provisions had in effect a lot to be modest about.

Could I come to the question that your Honour Justice Gageler asked my learned friend in relation to a combination, in effect, of section 34(2) and 35(1)? So far as section 34(2) is concerned, your Honour – and I think I am seeking to answer what your Honour was putting – one looks at section 34(2) and one looks to see first of all what is the loss or damage which is the subject of the claim, and that loss or damage is one which is caused, and it is caused according to the application of legal criteria as to causation and necessarily there will be a background of events which amount to the cause of action giving rise to the loss.

Now, one looks to see, your Honour, so far as the other person - the person contended to be the concurrent wrongdoer – to see in relation to the loss that has been the subject of the first claim, whether it is possible to say that the other person, the suggested concurrent wrongdoer, caused according to the ordinary legal criteria, that loss or damage.

Now, if they did, it does not matter whether they are a joint or a several tortfeasor or whether the circumstances resulting in the same damage are different. But, provided one arrives at that concluding point and also in a sense the starting point for the same loss or damage, then the tests are satisfied in that way. Of course to arrive at a conclusion so far as any one of them is concerned, one looks to see what happened, but there does not have to be any identity of the two.

Could we just say, your Honours, those are the matters to which I wish to make reference in relation to the appeal itself. Your Honours, so far as the special leave application is concerned, could I just take your Honours for one moment to our submissions in reply at paragraph 19. There is no doubt, of course, that we should have been aware of the rates of interest provided for under the mortgage and matters of that kind. But it is an area which has been the subject of some regulation in the statute, and in particular by the application of section 5(d), and the question is not – the starting point may well be what we knew, but the question is should the interest be allowed as damages at the rates provided for in the light of the provisions of section 5(d), a matter the subject of our earlier submissions. Your Honours, those are our submissions.

FRENCH CJ: Yes, thank you, Mr Jackson. The Court will reserve its decision. The Court adjourns until 11 o’clock tomorrow morning.

AT 4.04 PM THE MATTER WAS ADJOURNED