Ginelle Finance v Diakakis [2007] NSWSC 60

Mortgages were fraudulently registered over the land of the defendant in early 2001 and fraudulently refinanced in late 2001. The defendant discovered the existence of the mortgages and went to the police. The lender brought these proceedings and obtained summary judgement for possession on the basis of indefeasibility of title.

The defendant brought cross-claims against the two solicitors (Cassimatis & Grogan)who purported to act for him on the advance and refinance respectively. The two solicitors cross-claimed against each other. This decision concerned the fate of those cross-claims.

The court found that the solicitors had both failed in their duty to the defendant by not ensuring he was really giving them instructions. Liability against Cassimatis was straightforward because he had falsely attested to witnessing the defendant’s signature. Grogan claimed he had relied on those documents in assuming the defendant was aware of the transaction. Grogan did not falsely purport to witness the signatures. His contribution tot he fraud was simply in not checking direct with the defendant that the instructions he was receiving through his daughter in law were coming from him. The court found that he need not necessarily have been under a duty to verify his instructions but that several risk factors should have rung alarm bells and therefore he had a positive duty to do so.

In determining the proportion of the liability Cassimatis and Grogan each had to bear the court held:

In this case it seems to me that the contribution by both Mr Grogan and Mr Cassimatis to the loss suffered by Mr Diakakis was the same. Where their actions significantly differ is in relation to a comparison; of relative culpability. In that sense Mr Grogan was as much a `victim of the fraudulent behaviour .. as was Mr Diakakis. The conduct of Mr Cassimatis, however, in falsely asserting that events had occurred when they had not, involved a much higher level of culpability than that of Mr Grogan. Taking those matters into account, I would attribute liability between them as 25% against Mr Grogan and 75% against Mr Cassimatis.

Solicitors acting for borrowers should study Matthew Bransgrove’s article in the Law Society Journal “What can solicitors do to reduce mortgage fraud”

Click here to read the full judgment

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