Vertzayias v King [2011] NSWCA 215

This case concerned the assessment of damages for negligence by a solicitor, who had been found liable in the court below in relation to two loans entered into by his client borrower. The solicitor was found negligent in failing to advise the retired pensioner that he was a joint borrower on the first loan along with his son as opposed to a guarantor, which was the father’s understanding. The father had previously guaranteed the son’s loan to NAB. The first loan monies were paid to the son’s company after discharging the son’s loan to NAB. A subsequent loan was entered into for $450,000. The father thought he was again guarantor. The son did not tell his father that his business had been wound up. The subsequent loan monies were paid to the son after discharging the first loan. The son went to jail for smuggling cocaine and there was a default on the subsequent loan. The lender claimed possession of the father’s property to enforce its security. The father cross-claimed for relief against the lender on the basis they were unjust contracts or the product of unconscionable conduct and against the solicitor for negligence. A settlement was reached as against the lender on the basis that judgment for possession was agreed provided it was not enforced until the father died or vacated. The father also agreed to pay any money from his claim against the solicitor to the lender. The lower court found that but for the solicitor’s negligence, the father would not have entered into the first loan or the second loan and awarded damages of $750,000. While the lower court purported in its findings not to allow the amount of the subsequent loan that went to repay NAB, the calculation of the award of damages did include that amount.

Damages assessment
The appeal court approached the assessment of damages by comparing the father’s position having entered into the two loans with the position he would have been in had he not entered into them as follows:

  1. The father incurred a direct liability on the first loan and then later on the second loan. His loss is the whole of his liability to the second lender and he has benefit of the payment made on the loan account to reduce the liability.
  2. The father would have had a contingent liability under the guarantee on the NAB loan but no actual liability.

The solicitor argued that the amount of the loans referable to repaying NAB had to be deducted from the damages calculation because that would have been a liability of the father in any event. This was rejected by the appeal court and the court held that the father’s loss included the NAB amount. The award for damages was upheld.

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