In this case some Arab immigrants were persuaded by friends and acquaintances to invest in a fraudulent scheme run by the now-incarcerated Karl Suleiman. They failed in their Contracts Review Act claim to have the loan set aside, however they succeeded in a cross-claim against the solicitor who rendered independent legal advice. The thrust of their case was that the claimed return, which exceeded 100% per annum, was so high that the solicitor should have advised the borrowers not to proceed or made sure that they obtained independent financial advice. The solicitor appealed.
Duty of Care
The Court of Appeal disagreed with the trial judge and found no negligence. Noting that:
Ms Jajoo was a 31 year old lawyer charged with the responsibility of explaining the loan and mortgage documentation to Mr and Mrs Riz. She was unaware of the nature of the investment, but the high return made it appear risky, a matter which was appreciated by her clients. She gave them clear advice about the necessity of seeing someone to give them independent advice on the underlying transactions – both legal and financial. She could reasonably apprehend that they understood her advice.
The Court felt that it was unreasonable for the solicitor to be expected to advice on something about which she had no knowledge and, when such advice formed no part ofher retainer:
Further, though it can be accepted that the return on the investment was apparently very high, there was no basis for Ms Jajoo to conclude, without investigation of the investment, what was interest or profit and what, if any, was a return of capital, or how long the payments of $10,000 (or $12,000) per fortnight were to continue.
The court expressly rejected the trial judge’s view that a solicitor retained to advise on a loan and mortgage transaction will be obliged to address the fairness or reasonableness of the underlying transaction. There is no duty for a solicitor with a limited retainer to advise beyond the retainer.
The judge was persuaded that Ms Jajoo should have said something more forceful or obtained written instructions. I do not agree. To comment on any informed basis about the underlying transaction required a knowledge of it. She did not have that knowledge. She was not retained to advise on it. She told her clients clearly to obtain independent financial advice and that it was necessary for them to do so. She thought that they understood the need for it and that they would act on her advice. In all the circumstances of how the case was fought, the evidence given and findings made I disagree with the primary judge that Ms Jajoo was not entitled to form that view.
The court took the time to bolster its finding on the duty of care question by also finding that had there been a duty of care, which was breached, there was nonetheless no causation proven. The only evidence that was given was by the borrowers and it was self-serving and inadmissible, and, moreover, their credibility had been impugned. The trial judge significantly alluded to the fact that they were welfare cheats.