TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, MEAGHER and POWELL JJA 5 March 1998, 15 September 1998 [1998] NSWCA 223 Negligence — Solicitor and client — Incorrect or inadequate advice or information — Mortgage transaction — Solicitors acting for borrowers — Solicitors alleged to have given incorrect or inadequate advice or information — Borrowers suffering loss — Whether borrowers merely obliged to prove reliance on advice or information — Whether borrowers obliged to show loss due to incorrect advice or information. Priestley JA Powell JA, in his reasons which I have had the benefit of reading in draft, has comprehensively set out the facts and the arguments in these appeals and his reasons for thinking they should be dismissed. I agree generally with Powell JA's reasons for not accepting the appellants' submissions that the trial judge was in error in finding that the appellants had not discharged the onus of proof on the question whether the respondents were in breach of their alleged duty to the appellants. In agreeing with both the trial judge and Powell JA in respect of this issue, I have particularly in mind the evidence given by Mrs Hetherington in para20 of her affidavit sworn 17 August 1995 and the fact that there appears to have been no real challenge to this evidence at the trial (the details on this point are set out at p18-p20 of Powell JA's reasons). Although the trial judge does not appear to have expressed any particular reliance on this aspect of the case in reaching his conclusions, it seems to me to be something strongly confirmatory of his view of the facts, which this court is entitled to take into account in dismissing the appeal. Since the appeals must fail because breaches of duty by the respondents were not established, it seems to me to be sufficient for the case to be decided on that basis alone, without the need to discuss the other points (reliance and causation) argued for the appellants. I agree with Powell JA that the appeals should be dismissed with costs. Meagher JA I agree with Powell JA. Powell JA Despite the irregular form of the Notice of Appeal which has been filed, the fact is that the Court is called upon to determine two appeals against a Judgment delivered and Orders made by Hodgson J (as he then was) on 5 September 1996, on which day his Honour dismissed as against the Respondents two sets of proceedings brought by the Appellants, which proceedings, because they arose out of a common set of facts, had, by consent, been heard together, the evidence in the one, so far as relevant, being evidence in the other. The first proceedings, ED No 4924/87, was commenced in November 1987. In those proceedings, the Plaintiff, James Tanna, who is described in the Notice of Appeal as the third of the three Appellants, sought as against the then sole Defendant, Deutsche Bank (Asia) AG ("the Bank'') - which, at the time of the happening of the events which gave rise to the proceedings, had been known as European Asian Bank AG - orders declaring void or unenforceable as against James Tanna, a Loan Agreement dated 28 June 1982 or varying the Loan 2 UNREPORTED JUDGMENTS Agreement so as to reduce the liability of James Tanna thereunder, which Loan Agreement and a Supplementary Loan Agreement dated 4 November 1983 had been entered into between the bank as lender and James Tanna and other members of the Tanna and Saad families (Mr and Mrs Saad being described in the Notice of Appeal as the first two Appellants), as borrowers. At some time thereafter, the Respondents, who then carried on practice as solicitors in partnership under the name and style of "Barwick and Co" were added as additional parties-Defendants against whom James Tanna sought to recover damages for their alleged failure, as his solicitors, adequately to advise him in respect of his entry into the Loan Agreement and Supplementary Loan Agreement and the securities given by him in relation thereto. Either at the time of the joinder of the Respondents as parties-Defendants, or at a later stage, Westpac Banking Corporation ("Westpac") was joined as a third party-Defendant in respect of which James Tanna sought a declaration that a certain mortgage which he had granted to Westpac, be declared to be void. In the event, however, it would seem that, prior to the proceedings coming on for hearing before Hodgson J, they were dismissed as against each of the Bank and Westpac, so that the hearing before Hodgson J concerned only James Tanna's claim against the Respondents for damages. The second proceedings, ED No 3105/93, was commenced on 28 November 1989 in the Common Law Division of the Court, being later transferred to the Equity Division of the Court. In those proceedings, Julie Saad, - who is the sister of James Tanna - and her husband, Neville Saad, who had joined with James Tanna and other members of the Tanna family in the Loan Agreement and Supplementary Loan Agreement, sought to recover from the Respondents damages for their alleged failure, as solicitors to Mr and Mrs Saad, adequately to advise them in relation to the Loan Agreement and the Supplementary Loan Agreement. Put shortly, Hodgson J held that James Tanna had failed to establish any negligence on the part of the Respondent in relation to his entry into the Loan Agreement but that the advice given to him in respect of his entry into the Supplementary Loan Agreement was inadequate. Despite this latter finding, his Honour found that James Tanna had failed to establish that he had sustained any damage by reason of the inadequacy of the advice given to him in relation into his entry into the Supplementary Loan Agreement. His Honour made similar findings against Mr and Mrs Saad in the proceedings which they had brought against the Respondents. Despite what one can only describe as an inadequate Notice of Appeal, the Appellants, on the hearing of the appeal, sought to challenge Hodgson J's findings, first, that the Appellants had failed to establish any breach of duty on the part of the Respondents in relation to the Loan Agreement; and second, that the Appellants had failed to establish that they had sustained any damage as the result of the inadequate advice which his Honour held had been given to them in relation to the Supplementary Loan Agreement. In relation to the second of those challenges, the Appellants sought to submit that, when, in the course of his Judgment, Hodgson J came to the question of causation, his Honour misdirected himself and adopted a test which, so it was said, was inconsistent with the statement of principle said to have been laid down by Millett LJ - who delivered the leading judgment - in Bristol & West Building URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 3 Society v Mothew!. In this respect, so it was submitted, Hodgson J erred in holding that, in order to establish causation, it was incumbent upon the Appellants to establish that they would not have entered into the transactions if they had understood their effect; rather, so it was submitted, his Honour should have held that it was sufficient for the Appellants to prove that they relied on such advice as was given to them, that is to say, that they would not have acted as they did but for the advice which they were given. It is in this context that it is necessary now to record as best as one can - for the evidence is, in a number of respects, obscure - the facts which led ultimately to the commencement of these proceedings. James Tanna and Mrs Saad appear to be two of the five children of the marriage of Kenneth Anthony Tanna and his wife - whose name does not appear from the material in the appeal papers - the other children being Vincent Tanna and two daughters whose names do not appear in the appeal papers. Of the children, Vincent Tanna appears to have been the eldest, although his age does not appear in the appeal papers, Mrs Saad appears to be the second eldest - although the date of her birth is obscure, it appears as if it may have been 1935 or thereabouts - James Tanna, who was born in January 1937, was the third eldest and the two other daughters - whose dates of birth do not appear in the appeal papers - appear to have been the youngest of the children. Each of the children appears to have been born in North Lebanon where the family then lived. Although it is not entirely clear that this was so, it would appear that Vincent Tanna - who although joined as a Cross-Respondent to a Cross-Claim which had been raised by the Respondents in each proceedings, which Cross-Claim was, in each proceeding, discontinued (T 1), did not give evidence - was the first of the Tanna family to immigrate to this country. Kenneth Tanna came to this country in 1950 or thereabouts accompanied by Mrs Saad, her husband, whom she had married in 1949, and their eldest child, Kevin. Kenneth Tanna's wife, accompanied by James Tanna and the two younger daughters, came to this country in December 1954 or thereabouts. In an Affidavit sworn by her on 28 May 1995, Mrs Saad said that, except for a few weeks when she was above five or six years of age, she never went to school, that she is illiterate in both Arabic and English, and, save for being able to sign her name - a facility which she learnt only after she came to this country - she cannot read or write whether in Arabic or English. She is, however, able to understand simple spoken English. Since Mr Saad gave no evidence whatsoever on the hearing, whether by Affidavit or otherwise, it is impossible to make any judgment upon his level of literacy whether in Arabic or English - all that one knows is that he is said to suffer from a significant degree of hearing loss (see, for example, AB 92) In an Affidavit which he swore on 25 April 1995, James Tanna said that he went to primary school in Lebanon until he was thirteen years of age and that he was fluent in speaking Arabic and reasonable in reading Arabic. James Tanna further said that, when he arrived in this country, he had no command of the English language and could not read English and that he has never undertaken any form of study of English. James Tanna further said that he was able to read a little English, and that he could write English but poorly and his spelling is very bad. 1. [1998] Ch 1; [1997] 2 WLR 436; [1996] 4 AER 698 4 UNREPORTED JUDGMENTS Although, as with many other aspects of this matter, the evidence appears to have been left in an unsatisfactory state, it would appear that, after they had arrived in this country, Kenneth Tanna, Vincent Tanna, Mr and Mrs Saad and James Tanna, all worked very hard in order to improve their lot in life. It would appear that, at some time, Kenneth Tanna acquired, either in his own name or jointly with Vincent Tanna, a property - which appears as if it may have been on the Great Western Highway at Parramatta - in which he, or they, conducted a business known as the Parramatta Laundry. Over the years, Kenneth Tanna seems to have acquired, either on his own or jointly with Vincent Tanna - and possibly with James Tanna - other properties. In the application for a foreign currency loan in Swiss francs which was made to the Bank in 1982 (AB 543-556), it was said that Kenneth Tanna owned a private home at 18 Lansdowne Street, Parramatta, valued at $85,000.00 and that he owned jointly with Vincent Tanna, a large house at 30 Lennox Street, Parramatta valued at $500,000.00, two buildings at Lansdowne Street, Parramatta valued at $250,000.00, a development at 18-20 Great Western Highway, Parramatta valued at $3,000,000.00 and vacant land at 24-26 Great Western Highway, Parramatta valued at $720,000.00. In the same application it was said, that, in addition to the properties which he owned jointly with Kenneth Tanna, Vincent Tanna owned jointly with his wife Therese (or Theresa) Tanna, a house at 6 Boundary Street, Parramatta, valued at $200,000.00, a private home on a large block of land at 22 Great Western Highway, Parramatta, valued at $480,000.00 and a house at 46 Boundary Street, Parramatta valued at $200,000.00. In the Affidavit to which I have earlier referred, Mrs Saad said that, after she arrived in Australia, she worked for two periods of two years each as a process worker in factories at Marrickville and Flemington, thereafter in the Parramatta Laundry for nine years, and finally in a shop managed by her son Kevin for a period of approximately seven years. Save that in the application to the Bank to which I have earlier referred, it was said that Mr Saad was a supervisor at Pilkington Tiles (Aust) Pty Ltd there is no indication of the employment history of Mr Saad. In her Affidavit, Mrs Saad said that, two years after she and her husband arrived in this country, they purchased land and built a house at 64 Meehan Street, Granville and that shortly afterwards they purchased another block at 60 Meehan Street, Granville. Some eight years later, so Mrs Saad said, she and her husband purchased a house and a shop known as 51 Rosehill Street, Parramatta, to which property it would seem they later moved to live. Following that, they purchased the property known as 62 Meehan Street, Granville. Thereafter, they erected on the three blocks at Meehan Street, Granville, a two storey block containing sixteen two bedroom units, obtaining from Perpetual Trustee Ltd an interest only mortgage in the sum of $345,000.00 to enable them to do so. In the application to the Bank the units at Meehan Street, Granville were said to be valued at $805,000.00 while the property at 51 Rosehill Street, Parramatta was said to be valued at $85,000.00. It would appear that after they were completed, all the units were let, the rents from the units being used to pay interest on the mortgage debt as well as outgoings on the property. In his Affidavit, James Tanna said that, between 1955 and 1969, he worked in various jobs in Australia as a process worker and labourer. In 1961 or thereabouts, so he said, he, together with his father and brother, purchased the properties at 22-22A Lansdowne Street, Parramatta - the information as to the Lansdowne Street, Parramatta property contained in the application to European URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 5 Asian Bank AG to which I have earlier referred was, in this respect at least, inaccurate. After the property had been acquired, so James Tanna said, the house was erected in it was put in good order so that it could be let. In 1969, so James Tanna said, he bought a property known as 75 Prospect Street, Harris Park, upon which were erected two semi-detached cottages, both of which he let. That property was acquired partly from using James Tanna's savings and partly by using the proceeds of a loan which James Tanna had obtained from the Bank of New South Wales (as it was then known) at its branch at George and Church Streets, Parramatta. In 1976, James Tanna married in Lebanon, following which Mr and Mrs Tanna returned to Australia. Thereafter, in 1978 or thereabouts, James Tanna had erected on the property at 75 Prospect Street, Harris Park a building containing eight two bedroom units, the construction of that building being financed by the proceeds of loans $140,000.00 which James Tanner had obtained through a firm of solicitors, Coleman & Greig of Parramatta. On completion of the building, James Tanna and his wife and family moved to live in one of the units. In the application to the Bank to which I have earlier referred, James Tanna was there described as "Welder - Precision Pipe Pty Ltd". Although, in this respect, too, the evidence as been left in a thoroughly unsatisfactory state, it would seem that, in 1980 or thereabouts, Kenneth Tanna and Vincent Tanna, had the building, or buildings, which was, or were, erected on the property at 18-20 Great Western Highway, Parramatta, demolished and commenced the erection of a residential building intended to contain forty-two two bedroom units. The application to the Bank indicates that it was the intention of Kenneth Tanna and Vincent Tanna, once that development had been completed, to have constructed on the property at 24-26 Great Western Highway, Parramatta, which, as I have earlier indicated, was vacant, and which, at that time, was let as a car yard, another residential building containing some seventy home units. The evidence would further suggest that by July 1981 there had been borrowed from the Australia and New Zealand Banking Group ("ANZ") sums of the order of $1,100,000.00 which sums were applied in the construction of the building, those sums having been raised upon the security of various properties including the property at 22-22A Lansdowne Street, Parramatta, James Tanna, seemingly as a guarantor, joining in the mortgage over that property. Subsequent events would seem to suggest that, by the middle or latter part of 1981, Kenneth Tanna and Vincent Tanna were finding it difficult to service the mortgage debt which they had incurred in order to commence the erection of the residential development and that, by reason of that fact, Vincent Tanna sought to obtain finance elsewhere at a lower rate of interest. At the same time, so it would seem, the debts which Mr and Mrs Saad, on the one hand and James Tanna, on the other, had incurred for the purpose of carrying out their respective developments were due for repayment in 1982 and both parties thought that it might be necessary in order that they might discharge those debts that the units be brought under the provisions of the Strata Titles Act so that some of the units might be sold. In the absence of evidence from Kenneth Tanna - who died in December 1985 - or Vincent Tanna, it is quite impossible to know whether - as counsel for the Appellants seemed to suggest on the hearing of the appeal (T 5) - what Vincent Tanna did was done, not for the benefit of his father, himself and the other members of the family, but purely for the benefit of his father and himself. Whatever may have been Vincent Tanna's motivation, however, there seems to be 6 UNREPORTED JUDGMENTS little doubt that, in late 1981, Vincent Tanna approached both Mrs Saad and James Tanna with a proposal that they join with their father and himself in seeking to raise a foreign currency loan in a sum sufficient to pay out the existing mortgages of the ANZ, the Permanent Trustee Company Ltd and the loan which James Tanna said had been obtained from the clients of Coleman & Greig - those loans appear to have been discharged from the proceeds of a temporary loan later obtained from the Commercial Banking Company of Sydney Ltd - which new loan, since it would be at a substantially lower rate of interest than was the rate of interest payable on the existing loans, would be easier to service, a fact which would enable Mr and Mrs Saad, on the one hand, and James Tanna, on the other, to retain their units and not sell off part of them. Although the evidence does not clearly demonstrate that this was so, it seems tolerably plain that, having obtained the acquiescence of Mr and Mrs Saad, on the one hand, and James Tanna, on the other, to his proposal, Vincent Tanna then caused the application to the Bank to which I have earlier referred, to be prepared and submitted to the Bank. It is convenient to pause, here, to record that, although, both in the Affidavits which each swore, and in the oral evidence which each gave on the hearing before Hodgson J, each of Mrs Saad and James Tanna sought to convey the impression that she or he was an innocent abroad, with no real understanding of business and no experience of mortgages, what I have earlier recorded makes it clear that, whatever may have been their lack of sophistication, each of Mrs Saad and James Tanna was far from being an innocent abroad, that each had experience of business as, for example, arranging for the building of their respective residential developments and the raising of finance for those purposes and that each, for those purposes, had been accustomed to raising money by way of mortgage. However, to return to the narrative: the application to the Bank produced an offer, dated 18 March 1982, addressed to Vincent Tanna and his wife, Kenneth Tanna, James Tanna and Mr and Mrs Saad (AB 561-563) of a loan facility in an amount of AUD$1,600,000.00 in Swiss francs equivalent with currency option for the purpose of financing the completion of the residential development at 18-20 Great Western Highway, Parramatta, the period of that facility to be for five years from the date of draw down, the facility to be repaid in eight approximately equal instalments of AUD$200,000.00 each, with the first instalment due eighteen months after the date of the first drawn down, and to bear interest at a rate equal to 2'4% per annum. "above six months Singapore inter bank offer rate payable semi annually in arrears"; security for the facility to be by way of first registered mortgages over the properties at 22 Great Western Highway, Parramatta, the development property at 18-20 Great Western Highway, Parramatta, James Tanna's property at Prospect Street, Harris Park, Mr and Mrs Saad's property at 60-64 Meehan Street, Parramatta and joint and several guarantees by Vincent Tanna and his wife, Kenneth Tanna, James Tanna and Mr and Mrs Saad. It would appear that, on 2 April 1982, Vincent Tanna and his wife, Kenneth Tanna, James Tanna and Mr and Mrs Saad attended at the Sydney representative office of the Bank and there signed a copy of the letter of offer accepting the terms and conditions, a receipt for a copy of the Bank's general business conditions, and an application to open an account with the Bank, those signatures being witnessed by a Ms D Payne, who appears to have been on the staff of the Bank at its Sydney representative office. URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 7 I pause here to note that, despite the fact that the addressees of the offer accepted the terms and conditions - including the provision of joint and several guarantees - contained in it, other material to which I will later refer (AB 295-296, AB 93) would indicate that the addressees agreed that, as between themselves, the liability to discharge the amount of the loan and to pay the interest payable in respect of the loan would be borne in proportion to the amount of their loans which were to be refinanced by the advance which had been sought. Although the Respondent's firm had, on previous occasions, acted for one or more of the members of the Tanna family and the Saad family, it would appear that no advice had been sought from the Respondent's firm, nor had the Respondent's firm been retained to act, in relation to the application which was made to the Bank prior to 2 April 1982. Meantime, on 30 March 1982, Messrs Holman Webb, the then solicitors for the Bank, had written to Vincent Tanna advising that that firm had been retained to act on behalf of the Bank and seeking (inter alia) details as to the names, addresses and occupations of the addressees of the offer and "full title particulars" in respect of the properties to provide the security. It would seem that following upon his receipt of that letter Vincent Tanna then retained the Respondent's firm - the initial instructions being taken by the Respondent Mr McCabe - to act for the addressees in connection with the proposed loan transaction. The retainer of the Respondent's firm appears to have been given on 6 April 1982, that being the date upon which the firm's file was opened. Thereafter, Mr McCabe wrote to Messrs Holman Webb on 8 April 1982 (AB 234-236) providing the particulars of title and other details which had been sought. Apart from sending copies of documents to Vincent Tanna on 14 April 1982, Mr McCabe thereafter delegated the day to day conduct of the matter to Mrs Avril Hetherington, a solicitor clerk in the firm's employ. However, in accordance with what appears to have been the practice of the firm at the time, Mrs Hetherington was accustomed to discuss the progress of the matter with Mr McCabe as the partner supervising the conduct of the matter. On 7 May 1982, Vincent Tanna and his wife, Kenneth Tanna, Mr and Mrs Saad and James Tanna attended at the offices of the Respondent's firm for the purpose of executing the formal Loan Agreement (AB 155-179) which had been prepared by Messrs Holman Webb, the various forms of security documents required, and Statutory Declarations (AB 151-154) which had been required by Messrs Holman Webb in connection with the proposed loan, in which Statutory Declarations the various declarants declared that there were no unsatisfied writs or judgments outstanding against them, that all rents, rates, presently payable taxes, including Land Tax, presently due and other statutory charges in respect of the properties to be provided by way of security had been paid and that there were no outstanding statutory or other Local Government notices affecting of the properties. In the Affidavit which she swore on 17 August 1995, Mrs Hetherington set out (AB 139-140) what she said was the substance of the explanation which she gave to the parties. In that explanation, so Mrs Hetherington said, she told the parties that they were paying out the old mortgages on their properties and that they were all becoming the borrowers under the new loan and that they would all have to pay the whole amount and that if there were a failure to pay, each would be liable for the whole amount. Having set out that explanation, Mrs Hetherington, in her Affidavit, said: 8 UNREPORTED JUDGMENTS "13. I did not say everything that appears in the previous paragraph all in one monologue. I have set out in that paragraph words to the effect of the things that I said during the course of the conference. I was frequently interrupted when I was talking by Vincent who would then start talking to other members of the family in what I believe was the Lebanese language. I did not understand what he was saying to them. 14. As I explained things to the family I gesticulated and used my hands a great deal. So, for example, I can remember that when I was saying to them 'You will all have to pay the whole amount' I moved my two hands in the shape of a circle when I said the word 'whole'. I can remember also speaking direct to each individual person and saying 'You will be liable for the whole amount'. I can remember asking each member of the family individually "Do you understand what I have said?' and each of them either said 'Yes' or 'I understand' or nodded." It is appropriate, here, to note that, although, later in his Judgment, Hodgson J appeared to express some doubt as to whether or not the explanation which Mrs Hetherington gave was adequate, he, when dealing with the question of the credit of the various witnesses and after expressing what I consider to have been significant reservations as to the credibility of the evidence given by Mrs Saad and James Tanna (AB 747-748) said of Mrs Hetherington (AB 749-750): "... I think that (she) gave her evidence honestly and with reasonable recollection. Again, I think there was a certain amount of reconstruction of imperfectly remembered material, affected by a belief that she would have done at the time must have been correct." It would appear that, following a telephone call between Mr L J Jackson of Messrs Holman Webb and Mrs Hetherington on 25 May 1982, Mr Jackson wrote to the Respondent's firm on the following day enclosing a replacement p8 for the Loan Agreement, which page incorporated a cl15.06 which had been omitted from the draft document previously submitted, and requested that Mrs Hetherington have the replacement page initialled in the margin adjacent to cl5.6 (AB 721-722). At some stage which is not revealed by the evidence, the parties did in fact initial the substituted page (AB 576) which was then forwarded to Messrs Holman Webb. Although the evidence does not disclose why this was done, it is at least possible that because it had become apparent that the whole of the proposed loan from the Bank would be exhausted in discharging the existing mortgages over the various properties and in paying legal and other associated costs, it was necessary for further moneys to be obtained in order that the development at 18-20 Great Western Highway, Parramatta might continue. But whatever be the reason, it would appear that, prior to 28 June 1982 - the relevance of which date will shortly appear - arrangements had been made for there to be borrowed from Roland Gridiger, a solicitor, and a person and company associated with him, a sum of $400,000.00, that sum to be secured on the property at Lansdowne Street, Parramatta and to be repayable in 3 months. Although the evidence is not entirely clear, Mrs Hetherington's Affidavit (AB 141) seems to suggest that all the parties attended at the offices of the Respondent's firm on 28 June 1982, on which day settlement of the loan transaction took place (the Settlement Statement appears at AB 145 and records that the whole of the mortgage loan was dispersed in discharge of the existing mortgages and in legal and other associated costs). It is Mrs Hetherington's recollection (AB 141) that, later in the day, Vincent Tanna, Kenneth Tanna and URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 9 James Tanna returned to the office for the purpose of executing the mortgage (AB 216-218) to be granted to Mr Gridiger and his associates and that that mortgage loan was settled on the same day. That mortgage provided (AB 217) for interest at the rate of 32% per annum reducible to 12% per annum on prompt payment. It would appear that after the Respondent's firm had forwarded statements of account to Vincent Tanna he sought to have a reconciliation of the various items in the accounts. On 29 July 1982, Mr McCabe wrote to Vincent Tanna a letter (AB 295-296) which contained the following (inter alia): "The second account relates to all costs and out of pocket expenses associated with the European and Asian Bank. The sum of $6,000.00 has previously been paid from the advance from the European and Asian Bank. The amount outstanding is $7,478.50. We believe that an equitable distribution would be on the basis of payment of costs by syndicate members in accordance with the proportion of their loans. Accordingly, proportion (sic) of costs payable is as follows: - (i) Neville and Julie Saad 22.4% (ii) James Tanna 7.6% (iii) Vincent and Kenneth Tanna 70.0% If it is assumed that the syndicate as a whole was responsible for the $6,000.00 previously paid, then the total amount to be divided is $16,934.70 which is calculated as the total of the initial account for loan approvals ($9,456.20) and the balance outstanding on the loan from European and Asian Bank ($7,478.50). The proportions in respect of this amount are as follows: - (i) Neville and Julie Saad $3,793.37 (ii) James Tanna 1,287.04 (iii) Kenneth and Vincent Tanna 11,854.29 It is our understanding that Kenneth and James Tanna (sic) have paid from their own funds the initial account of $9,456.20. If this is correct, this amount should be deducted from their proportion of the costs leaving a balance payable by Kenneth and James Tanna (sic) of $2,398.09. Accordingly, the outstanding balance of $7,478.50 should now be paid as follows: (i) Neville and Julie Saad $3,793.37 (ii) James Tanna 1,287.04 (iii) Kenneth and Vincent Tanna 2,398.09 We note that we have not included in the above costs the sum of $1,802. 00 payable by yourself and Ken in respect of a mortgage to the ANZ Bank over the land at Parramatta. Accordingly, the total amount payable by yourself and Ken is $4,200.09." On 24 August 1982, Mrs Hetherington wrote to Vincent Tanna a letter (AB 297) forwarding to him a copy of the Epitome of Mortgage which had been received from Mr Gridiger. In her Affidavit, Mrs Hetherington deposed (inter alia) (AB 142): - "20. After I had prepared and sent out the bill of 30 June, 1982 Julie Saad rang me up. She said to me words to the effect: 10 UNREPORTED JUDGMENTS 'Can you calculate my proportion of the loan I have to repay and my proportion of your bill?' I said to her words to the effect: 'I told you at the time you signed the documents that you're all liable for the whole amount of the loan. As far as the bill is concerned it's not my business what proportion of the bill you pay - that is something you have to work out for yourselves.' Julie Saad then said: "But I have to know my proportion of the bill.' I said: 'Pll get back to you.' I subsequently had a discussion with Terry McCabe about this matter. I ascertained that he had either spoken to Vincent Tanna by the time I spoke to him or he subsequently spoke to Vincent Tanna about the same matter. As a result of my discussions with Mr McCabe I then wrote a letter to Mrs Saad dated 24 August 1982..." That letter (AB 93) was in the following terms: - "RE: MORTGAGE ADVANCE We refer to the above matter and now enclose for your information the relevant copies of the Mortgage documents. We have enclosed the copies as follows: - 1. Real Property Act mortgage 2. Deed of Mortgage 3. Deed of Loan Please note that some of the copies have the Tanna's names thereon, since we only kept one master copy of the documents and did not copy each parties' documents separately, since the terms were identical. We advise that in relation to the repayment of the mortgage, we have calculated the amount required by you to discharge your original mortgage over the total amount borrowed and arrived at a percentage of 22.5%, in terms of the total amount to be repaid. In other words, you and your husband must make 22.5% of the total amount of repayments. The balance owing is to be paid by the other parties to the Mortgage. We trust that this information will be of help to you, and should you require any further help or information, please do not hesitate to communicate with us." Such few questions as were directed to Mrs Hetherington in the course of cross-examination (T 198-199) as to what she had said in para20 of her Affidavit and in this letter appear to me to have been directionless and were, in any event, ineffectual. Save that, in the Affidavit which she had earlier sworn, she had deposed (inter alia) (AB 80):- "44. Shortly after - (28 June 1982) "I wrote to Barwick & Co about the loan. I received a reply by letter dated 24 August 1982..." Mrs Saad gave no evidence at all directed to this question. In particular Mrs Saad did not, in her oral evidence on the hearing before Hodgson J, deny what Mrs Hetherington had said in para20 of her Affidavit, nor did she give any evidence as to her understanding of what was contained in the letter. On 11 October 1982, Messrs Holman Webb wrote to the Respondent's firm advising that Caveats had been lodged in respect of the property 22 Great Western Highway, Parramatta, those Caveats apparently relating to unpaid Land Tax - this, so it seems, because the cheque which had been provided to the Land Tax Commission for the purpose of obtaining a Land Tax Certificate had been cancelled by Vincent Tanna prior to it being cleared. At the same time, Mrs URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 11 Hetherington forwarded Statutory Declarations to be provided in order to answer requisitions which had been raised by the Registrar General. On 16 November 1982, Mrs Hetherington wrote to Vincent Tanna (AB 300) a letter drawing to his attention the question of the outstanding Land Tax and adding: "We would ask that you attend to rectification of this situation at your earliest opportunity, bearing in mind your request from the European and Asian Bank for a further loan. We might advise that, in fact, if you do have a Land Tax liability outstanding and there remain Caveats on the title, European and Asian may have second thoughts in relation to a further loan to payout (sic) the Gridiger finance situation." and then, in relation to the Statutory Declarations: "We enclose for your signature and your brothers (sic) signature the Statutory Declarations referred to in the fourth paragraph of the letter. We have marked the places where you must sign and would request that you simply sign them and return them to us at your earliest opportunity wherein Mrs Hetherington will attend to witnessing of same." add the reference to the question of the Statutory Declarations because, when he came to deal with the question of credibility of the various witnesses who had been called to give evidence before him, Hodgson J, immediately prior to the passage relating to Mrs Hetherington's credibility which I have earlier (p15 (above)) set out, wrote: "Turning to the Defendant's witnesses, I was concerned by certain evidence given by Mrs Hetherington about the Statutory Declarations sent under cover of the letter of 16 November 1982. It is most unsatisfactory that a solicitor should propose that Statutory Declarations be signed in her absence, and then returned to her to be witnessed. Mrs Hetherington says that she took that course because she was instructed to. However, the matter was not taken up with Mr McCabe, who may have given the instruction, and there were no questions asked as to whether the Statutory Declarations were in fact dishonestly witnessed. However, the circumstance that this should even be proposed reflects badly on the standards of a solicitor." As will be apparent from the first of the extracts from the letter of 16 November which I have set out above, the mortgage which had been granted to Mr Gridiger and his associates was overdue and Vincent Tanna, Kenneth Tanna and James Tanna did not have the funds to discharge it. However, on 17 November 1982 (AB 301), Mr Gridiger wrote to the Respondent's firm advising that the mortgage had been extended until 25 November 1982. The mortgage was still outstanding in July 1983. It would appear that, in mid-1983, Mrs Hetherington left the employ of the Respondent's firm to have a child and that she has not, since that time, returned to practise. On 18 July 1983, the Bank wrote to the parties a letter (AB 241-243) offering an additional AUD$600,000.00 loan facility in Swiss francs with a currency option for the purpose of refinancing existing borrowings and the finance of working capital, that loan facility to be for a period of approximately three years and eleven months from the date of drawn down. One of the conditions of the provision of that additional loan facility was that there be provided first registered mortgages over the vacant land at 24-26 Great Western Highway, Parramatta, the property at 22-22A Lansdowne Street, Parramatta and the property at 30 Lennox 12 UNREPORTED JUDGMENTS Street, Parramatta, the first and third of which properties, as I have earlier noted, were held by Vincent Tanna and Kenneth Tanna, while the second of which properties, was held by Vincent Tanna, Kenneth Tanna and James Tanna and had already been used as security for the Gridiger loan. On 18 July 1983, Messrs Holman Webb wrote to the Respondent's firm a letter (AB 244-245) advising that they had been instructed to act on behalf of the Bank and seeking (inter alia) title particulars in respect of the three additional properties to be provided by way of security and seeking survey certificates in relation to those properties. The offer of additional finance appears to have been discussed between Mr McCabe and Mr Gridiger and, on 26 July 1983, Mr R L Downey - then a conveyancing clerk in the employ of the Respondents who had taken over the matter after Mrs Hetherington had left the employ of the Respondents - forwarded a copy of the approval to Mr Gridiger who, on the following day, wrote to the Respondent's firm a letter (AB 308) forwarding, returnable on demand, an Old System search, a Deed of Conveyance and Survey Certificates relating to the three properties. It would seem that Vincent Tanna either telephoned, or called at, the offices of the Respondents on 26 July 1983 and spoke to Mr McCabe who, in a diary, or file note (AB 327) dated that day recorded: "Has not made any payments to Gridiger Further borrowings not settled until Land Tax paid Won't be content with less (sic) properties Tanna offered all props Won't increase over $600,000.00 Has asked that we arrange short term finance Won't settle until Land Tax is paid Int payment of $55,000.00 Advised him that knocked back on more funds Will release 24-26 if to be developed We to organise $60,000.00 loan Has extended to 2 years int only." Thereafter, on 19 August 1983, Mr McCabe wrote to the Commissioner of Land Tax seeking that the reassessment of Land Tax be carried out on an urgent basis as "our clients have arranged a substantial refinancing of their affairs which cannot proceed until fresh assessments are obtained. Any delay will cause our clients substantial hardship." A file note (AB 310) dated 31 August 1983 records: "Re: V Tanna Mr Tanna called and saw AJG and TMc in conference. He advised that he required the sum of $10,000.00 in order to prevent Mr Gridiger from imposing a penalty interest rate of 32%. He advised that he anticipated that the mortgage to european and asian banks (sic) would be settled by Friday 9 September 1983 and that funds would be available in order to pay out the $10,000.00 advance at the time of settlement. He also indicated that a nett return of $4,000.00 per week. He also indicated that he expected to have a receipt of a Westpac advance in the sum of $10,000.00. On this basis it was resolved that the loan would be advanced on security of an unregistered mortgage over 22 Great Western Highway, Parramatta. Terms to be: (i) loan to be repaid on or before 16 September 1983 URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 13 (ii) loan fee of $500.00 to be paid at $100.00 per week thereafter for late payment A formal receipt (AB 313) appears thereafter to have been prepared and signed by Vincent Tanna. Despite what Vincent Tanna had told Messrs Gallagher and McCabe on 31 August 1983, the further advance by the Bank was not settled in September 1983 - indeed, it was not settled until 18 November 1983. On 4 November 1983, the parties attended at the offices of the Respondents for the purpose of signing a Supplementary Loan Agreement which had been prepared by Messrs Holman Webb and, in the case of Vincent Tanna and Kenneth Tanna, for the purpose of signing as well a Deed of Old System Mortgage over the additional property required as security for the additional loan facility. In each case, the signatures of the parties were witnessed by Mr Downey, to whom I have earlier referred. In the Affidavit which he swore on 24 October 1995, Mr Downey deposed (inter alia) as follows (AB 238-239): "5. From reading the file of Barwick & Co I recall that I acted for the Tannas and the Saads in relation to a further loan obtained from the European Asian Bank in November 1983. I do not have much recollection about the particular matter but I have had the opportunity to examine the file and based on my recollection I say what follows. 8. I recall that the Tannas and the Saads as they introduced themselves came in to sign all the documents on a day, early in November 1983. I do not now recall what I said to the members of the family on that occasion. However, over the years of conducting conveyancing I had on a number of occasions acted for borrowers, guarantors and mortgagors. I do not recall what I said specifically. I understood at the time what a mortgage was and what guarantors were and I would expect that I would have explained this to those present with words to the following effect: "Once you have signed this document and you have received the money, all moneys including principal and interest are repayable by all parties. If the moneys aren't paid in accordance with the Loan Approval, then the properties can be sold immediately by the mortgagee.' I do not recall having been introduced to any members of the two families other than Vincent Tanna until then. As best as I can recall, all the persons present indicated by one means or another that they all understood what I had said. I then asked them to sign the Supplementary Loan Agreement and I witnessed their signatures. 9. Sometime during the conference with the Tannas and the Saads I arranged for Kenneth Tanna and Vincent Tanna to execute a Deed of Mortgage with European Asian Bank which related to part of the property which was to become additional security for the further moneys advanced. 10. I do not recall what I specifically said but I expect that I gave similar advice to that referred to at para8 herein." As [have earlier indicated, the agreement for the provision of the further loan facility was settled on 18 November 1983, the discharge of the mortgage granted to Mr Gridiger and his associates apparently being effected on the same day. What is described as a statement of account (AB 135) addressed to "V & F Tanna" on 23 November 1983 reveals that from the loan of $600,000.00 there 14 UNREPORTED JUDGMENTS were deducted sums totalling $104,373.45 of which $10,373.79 represented establishment fee, mortgagees' solicitors' costs, stamp duty on mortgage and brokerage fee, $33,790.50 represented outstanding Land Tax, $2,325.51 represented 1983-1984 water rates and $57,883.65 represented outstanding interest. After these deductions there was thus left the sum of $495,626.55 to be applied to discharge the mortgage which had been granted to Mr Gridiger and his associates. The same statement of account reveals that, in order to discharge the mortgage, some $542,987.94 was called for, that sum being made up as to $475,000.00 described as principal - the evidence does not indicate how that sum was arrived at - $162.42 was for Financial Institutions Duty, $2,000.00 represented costs and disbursements and $65,825.52 represented interest to 18 November 1983. The total of $542,987.94 was derived from $45,100.00 apparently obtained by the grant of a mortgage to the National Australia Bank, the sum of $495,626.55 available from the further loan made by the Bank AG and moneys totalling $2,261.39 apparently provided by Vincent Tanna. Although there appears to have been extensive evidence - both oral and documentary - tendered on the hearing before Hodgson J for the purpose of recording what was done after November 1983, it is not necessary for me to record that evidence in any detail. It is sufficient to adopt what was said by Hodgson J in the course of his Judgment which was as follows (AB 736-737): "The Great Western Highway project was apparently unsuccessful, and did not produce money sufficient to pay out money borrowed for that purpose. The properties mortgaged to the European Asian Bank by (Mr and Mrs Saad and James Tanna) were sold in order to pay out the amount owing to the Bank. James Tanna's property, 75 Prospect Street, Harris Park, was sold by contract dated 10th December 1987 for $440,000.00 with all proceeds going to the Bank. Mr and Mrs Saad sold eight of their sixteen units in 1985 and 1986, the nett proceeds of about $407,000.00 going to the Bank. The remaining eight units were sold by a contract dated 15th December 1987 for $480,000.00 with all proceeds going to the Bank. Their home at 51 Rosehill Street, Parramatta, was subject to a mortgage of about $120,000.00 in 1987. Mr and Mrs Saad say that, by reason of the loss of income of their other units, that mortgage has now gone up to $400,000.00." Although there appear to have been other issues raised for determination before Hodgson J, it is sufficient to extract from that part of his Honour's Judgment where he recorded what were those issues the following (AB 737-738): "James Tanna and Julie Saad that they cannot read English (indeed, Julie Saad says she cannot read at all); that they have limited understanding of spoken English; that they believed in May and June of 1982 that they were making themselves and their properties liable only for about $120,000.00 and $360,000.00 respectively, not for the whole advance of $1.6 million; and that they did not know what they were signing for in November 1983. James Tanna also says that he knew nothing about the Gridiger mortgage. The plaintiffs (sic) case is that Barwick & Co were under a duty to exercise reasonable skill and care, at least to ensure that there was no conflict of interests in the transactions, and to explain adequately to the plaintiffs the legal effect of what they were doing; that Barwick & Co breached this duty; and that, as a result, the plaintiffs became liable for more than what they believed they were making themselves liable for, and suffered damage. URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 15 The defendants accept that the plaintiffs were clients to whom the defendants owed a duty of skill and care. Evidence was led by Mrs Hetherington and Mr Downey concerning explanations given by them to the plaintiffs; and the defendants contend that there was no breach of duty. The defendants also raise a substantial issue on the related questions of causation and calculation of damages: even if the duty was breached, the defendants contend that the plaintiffs have not shown what, if anything, would have been done differently if the duty had not been breached." Having recorded what were the issues, Hodgson J then proceeded to record what were the submissions advanced on each side. In the course of his doing so, his Honour noted the following (inter alia) (AB 744-745): "(Counsel for the defendants) submitted that James Tanna was an unsatisfactory witness, who had no need to give his evidence totally, or almost totally, in Arabic; and who insisted that numerous earlier mortgages were either not signed by him or not explained. Mrs Saad also, he submitted, was not a reliable witness. She had a good appreciation of money matters. She would not accept the documents were signed by her where she apparently thought it was contrary to her interests in the case. (Counsel for the defendants) also pointed to inconsistencies in Mrs Saad's evidence about the execution of supplementary loan agreements. (Counsel for the defendants) substantially conceded that there was a breach of duty in relation to the entry by the Saads into the supplementary loan agreement in November 1983. However, he submitted that no damage was shown flowing from entry into that agreement. The evidence suggested that default would have occurred under the original loan agreement of $1.6 million and that there was no basis on which the court could infer the property owned by Vincent Tanna and Kenneth Tanna would then have borne the share of the advance attributable to them, or any greater share than they were ultimately able to pay. There was no evidence as to what other securities were provided by Vincent Tanna and Kenneth Tanna and what the value of those securities was from time to time." Having set out the submissions, Hodgson J then turned to the subject of "credit". Although I have earlier (see p15 (above)) recorded what were his Honour's observations as to the credibility of Mrs Saad and James Tanna, it is appropriate, here, to record, that, at the commencement of this part of his Judgment his Honour said (AB 746-747): "Although this is not strictly a matter of credit, I first consider what, if anything, follows from the failure of Mr Saad to give evidence. Accepting that he does have a serious hearing impediment, I do not consider this to be an adequate explanation of why he did not give evidence. He could have given evidence (if these were indeed true) to the effect that he did not hear what was said on the occasions when loan and mortgage documents were signed, that he did not understand that he would be liable for money advanced for the use of Vincent Tanna, and that, if he had known this, he would not have signed the documents. The applicability of Jones v Dunkel to the failure of Mr Saad to give evidence was discussed during the hearing and in final submissions, but no application was made for leave to put on a late affidavit from him or to call him to give oral evidence. Accordingly, I do not see any basis for not applying Jones v Dunkel in relation to the failure of Mr Saad to give evidence. As will appear, this has some importance in a case where the onus lies squarely on the plaintiffs to prove causation. It is true that, if Mrs Saad alone had not signed the documents, the transactions would not have gone ahead; but as submitted by (counsel for the 16 UNREPORTED JUDGMENTS defendants), one would have expected there to be dialogue between Mr and Mrs Saad and a question arose about this, with a view to reaching agreement as to what course to take." Having dealt with the question of the parties' credibility, Hodgson J then turned to examine and record his findings upon, in the first instance, the case which had been advanced on behalf of James Tanna and, then, the case which had been advanced on behalf of Mr and Mrs Saad. In each case, his Honour dealt first with the question of duty and breach and then with the question of causation and damages. However, as there were certain themes which were common to the case of each of each of the plaintiffs it is perhaps more convenient to record first, his Honour's findings on duty and breach in each case before turning to his findings, in each case, on the question of causation and damage. When dealing the question of duty and breach in relation to James Tanna, his Honour wrote first (AB 750-753): "JAMES TANNA'S CASE Duty and Breach in 1982 I accept that the defendants had a duty to exercise reasonable skill and care in being alert to possible conflicts of interest, and in giving an adequate explanation to the clients of the legal effect of the transactions, in a way appropriate to the circumstances. In the case of the 1982 transaction with European Asian Bank, all borrowers were members of a family and were getting substantial benefits from the loan, albeit not to the same extent; and I do not think there was such a conflict of interests as to require the defendants to explicitly raise with the plaintiffs the question of whether they should have independent solicitors. I think that an adequate explanation to the plaintiffs of this transaction would have been directed towards ensuring that they understood at least the following elements. Firstly, the usual effect of a mortgage of property; secondly, that the loan had to be repaid in Swiss francs, so that currency movements could mean that the principal to be repaid could be substantially greater than $1. 6 million; and thirdly, that each participant was liable for the whole of the loan so that if, for example, Vincent Tanna did not repay the $1.1 million applied for his purposes and interest on that sum, then the plaintiffs would have to repay those sums as well as the parts of the loan taken for their own purposes. No specific complaint is made in respect of the first and second of those elements; and although I have some doubt whether the explanations which Mrs Hetherington says she gave to the second element were sufficient, I do not believe that was in issue in the case either as pleaded or as conducted. As for the third element, I have some doubt whether the explanations which Mrs Hetherington says she gave about this were sufficient, using words such as 'you will all have to pay the whole amount', 'the bank... can take all your properties... and sell them'. And 'if there isn't enough to pay, then the bank can take you all to Court' and 'each one of you will be individually liable', and whether, particularly in circumstances where she says that Vincent interrupted her talking in the Lebanese language, she did enough to ensure that each one of the borrowers understood the explanation she was giving in English. Mr Jacobson submitted that it was not put to Mrs Hetherington that she did not give a more pointed explanation, drawing specific attention to the possibility of having to repay money used by Vincent Tanna; if that had been put to her, then she could have had an explanation. Mr Jacobson also relied on evidence that she asked each of the participants individually "Do you understand', and each one of them indicated he or she did; and that the evidence was not challenged in URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 17 cross-examination. However, I do think that the issue of whether what Mrs Hetherington said and did was enough was sufficiently raised at the hearing. As I have already indicated, I do not accept evidence given for the plaintiffs that no explanation was given; but on the other hand, I do not feel confident about Mrs Hetherington's evidence that she asked each person individually 'Do you understand'; and I do believe that the circumstances should have raised the question for Mrs Hetherington whether the plaintiffs' understanding of English was adequate for them to understand what she was saying. However, the ultimate onus on this issue is squarely on the plaintiffs. Their evidence does not assist me to determine what was actually said. I believe something to the effect of Mrs Hetherington's evidence was said by her, although I cannot be confident as to its details. In the circumstances, I do not feel able either to decide precisely what was said, or to decide that, whatever it was, it amounted to a failure to perform the defendant's duty. Thave a similar difficulty in relation to the Gridiger mortgage. This mortgage did not have the unusual features of the European Bank mortgage (foreign currency, and a liability of each for the whole loan, in return for part only of the advance); although the evidence does suggest that the whole advance was probably used for Vincent Tanna's project, and not for the benefit of James Tanna. Furthermore, the interest rate of 32% was extraordinary; but this is not a subject of any specific allegation of breach of duty, and the evidence does not suggest any detriment to James Tanna from this interest rate. I believe that a standard sort of explanation was given of this mortgage, and the question is whether that was enough in the light of James Tanna's language limitations, and in a case where the mortgage money was apparently used for Vincent Tanna's purposes - although no evidence was led showing the actual application of this mortgage advance. In circumstances where the onus is squarely on the plaintiffs, I do not feel able to decide precisely what was said to James Tanna in relation to this mortgage, or to decide that, whatever it was, it amounted to a failure to perform the defendants' duty." and then (AB 757-758): "Breach of Duty in 1983 Prior to the 1983 transaction, James Tanna was already liable both under the European Asian Bank loan and the Gridiger mortgage. The 1983 transaction merely added $600,000.00 to the European Asian Bank loan, which in turn was used to pay out the Gridiger mortgage and interest and land tax due in respect of the original European Asian Bank loan. But I believe that James Tanna should have been advised explicitly of the serious breaches under the European Asian Bank loan and the Gridiger mortgage, and thereby given an opportunity to consider whether he should support the re-financing of the transaction, or in effect cut his losses then and there; and I find that this was not done." When he came to deal with those questions in relation to Mr and Mrs Saad his Honour wrote first (AB 759): "MR AND MRS SAAD'S CASE Breach of Duty in 1982 My conclusion here is the same as for James Tanna, for substantially the same reasons. There is the additional element of Mr Saad's hearing difficulty; but, in the absence of any evidence from Mr Saad himself, I do not think this takes the matter further." and then (AB 761-762): 18 UNREPORTED JUDGMENTS "Breach of Duty in 1983 In my opinion, the defendants clearly breached their duty to the Saads in 1983. There had been serious breaches under the Gridiger mortgage, to the extent that the defendants had even lent Vincent Tanna $10,000.00 to stave off imposition of interest at 32%; land tax of $30,000.00 and interest of $55,000.00 was outstanding under the European Asian Bank mortgage; and the defendants apparently were involved in seeking a further bank loan to make up the difference between the total liabilities to be repaid and the further $600,000.00 to be advanced by the European Asian Bank. Under the 1983 transaction, the Saads were to become liable for this further $600,000.00, which was to be wholly used up towards making good these breaches and repaying the Gridiger mortgage, for which the Saads were not liable. This involved a clear conflict of interests between the Saads and (at least) Vincent Tanna; and the Saads should have been advised to consult other solicitors. At the very least, the above matters should have been very plainly brought to the Saads' attention; and they were not." Although he had found that James Tanna had failed to establish any breach of duty to him in relation to either the original loan or the Gridiger loan, Hodgson J turned to record what his findings would have been had he found otherwise. This he did in the following terms (AB 753-757): "Causation and Damages in 1982 In case I am wrong in my finding that a breach of duty has not been established, I will consider the question of causation and damages, on the assumption that the defendants did breach their duty to James Tanna by not giving a sufficient explanation to him of the legal effect of the European Asian Bank mortgage or the Gridiger mortgage. On that assumption, I would find that James Tanna did not understand that he and his property would be liable for the whole of the European Asian Bank mortgage and the Gridiger mortgage, if the other borrowers (especially Vincent Tanna) did not pay the shares of the advance and interest thereon representing the amounts applied to their benefit. However, that does not of itself establish causation of loss flowing from entry into those mortgages. To prove causation, James Tanna must prove, on the balance of probabilities, that he would not have entered into the mortgages if he had understood their effect; and the amount of the damages will reflect the difference between his actual position and what it would have been if the defendants' duty had not been breached. James Tanna gave no evidence of what he would have done if he had understood the effect of the mortgages. It might be said that such evidence would not have been admissible, because it is purely hypothetical: it is not evidence of something actually observed or of actual beliefs or intentions. It is, of course, clear that, if a person at the time actually considers what he or she would do in a certain eventuality, and that consideration bears on the probabilities of whether or not some relevant steps would have been taken, then evidence can be given of that consideration and of any intentions actually formed. However, in the present case, it seems clear that James Tanna gave no consideration at the time as to what he would do if the mortgages he was about to sign made him liable for more than his $120,000.00. Nevertheless, I am firmly of the view that evidence of what he would have done if he had understood this, would have been admissible; cf Ellis v Wallsend District Hospital (1989) 17 NSWLR 553, at 560, 581-2, 607; Rogers v Whitaker (1991) 23 NSWLR 619, at 608, 611, 619; (1992) 175 CLR 479 at 492. URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 19 In my opinion, evidence of that kind may often be the most direct and understandable way in which a person can express a relevant actual past state of mind, which in turn bears on the probabilities of what that person would have done. The state of mind in question may not have been active or explicit or even fully conscious, because no actual consideration was given to the particular question at the time; but nevertheless what the person would have done in certain circumstances is plainly related to his or her state of mind at the time, comprising a multitude of beliefs and attitudes. It would be impossible directly to describe this state of mind fully and accurately. Very often the best that can be done is for the person to say what he or she would have done, if the relevant events had occurred: that is, in this case, if the defendants had not breached their duty. Such evidence may be far from conclusive, even from a completely honest witness, because it may be the result of unconscious reconstruction affected by the wisdom of hindsight; but in my opinion, it is clearly admissible. Where a party fails to ask questions of a witness in chief, the principle of Jones v Dunkel may apply; Commercial Union v Ferrcom Pty Ltd (1991) NSWLR 389 at 418-9. A fortiori, this would be the case where it is the party himself or herself who fails to give relevant evidence. Quaere whether that principle should be applied in this case: cf Ellis v Wallsend District Hospital (1989) 17 NSWLR at 590. In any event, it is clear that James Tanna's failure to give evidence on this matter means that his case of causation depends entirely on my being able to draw inferences from his other evidence and the circumstances. I cannot infer, on the balance of probabilities, that James Tanna would not have entered into the European Asian Bank mortgage or the Gridiger mortgage if he had understood their legal effect. He was already personally liable for the $1 million loan from the ANZ Bank, which was paid out with about $1.1 million of the $1. 6 million advance from the European Asian Bank. He trusted his brother Vincent, and his asset position at the time suggests that his trust had apparently paid off so far. There is no evidence that in June 1982 there were any signs that Vincent's project for the Great Western Highway property would be unsuccessful. No case was put on the basis that James Tanna, by reason of the defendants' breach of duty, lost the opportunity to consider his position, this being a commercial opportunity which had some value: cf Sellars v Adelaide Petroleum (1992-4) 179 CLR 332 at 335. In any event, I do not think in the circumstances of this case, that an opportunity for James Tanna to consider his position in the light of a full understanding of the proposed mortgages can be regarded as a valuable commercial opportunity: cf Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, and see also my discussion later in this judgment of the limitation defence. Accordingly, James Tanna's case based on the 1982 transaction must fail." Then his Honour turned to consider whether James Tanna had established a case for damages based on breach of duty which his Honour found had occurred in relation to the supplementary loan agreement. This, he did, in the following terms (AB 758-759): "Causation and Damages in 1983 However, it is clear that James Tanna has not proved causation of damages from any breach of duty in 1983. He gave no evidence about what he would have done if he had fully understood the situation; and, although the serious breaches under the European Asian Bank mortgage and the Gridiger mortgage may have given James Tanna cause to reconsider his trust of Vincent Tanna, the fact is that 20 UNREPORTED JUDGMENTS for James Tanna the 1983 transaction was merely a re-financing of existing liabilities. Without further evidence, I cannot infer that he would not have entered into this transaction, if he had understood it; or even that, if he had not entered into the transaction, he would have been any better off than he turned out to be. There is just no evidence which enables any conclusion to be drawn as to what would have happened to James Tanna's property and financial position generally, if he had refused to enter into the 1983 transaction, thereby presumably triggering some enforcement action under the Gridiger mortgage and subsequently, in all probability, the original European Asian Bank mortgage as well." As he had done in the case of James Tanna, Hodgson J recorded what would have been his findings in relation to damages if he had found that Mr and Mrs Saad had established a breach of duty in relation to the original loan transaction. This he did in the following terms (AB 759-561): "Causation and Damages in 1982 In case I am wrong in my finding that a breach of duty has not been established, I will consider the question of causation and damages, on the assumption that the defendants did breach their duty to Mr and Mrs Saad by not giving a sufficient explanation to them of the legal effect of the European Asian Bank mortgage. On that assumption, I would find that Mrs Saad did not understand that she and the Meehan Street property would be liable for the whole of the European Asian Bank mortgage, if the other borrowers did not pay their shares. Mrs Saad gave evidence that, if she under understood that the European Asian Bank mortgage made her liable for the whole $1.6 million, she would not have signed it. Mrs Saad was cross-examined in respect of this evidence: cf Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 572; 588-9, 607. She acknowledged that in 1982 the family was fairly close, that she trusted Vincent Tanna, and that she regarded him as a successful businessman. It is clear that she and her husband were receiving $361,000.00 out of the total of $1.6 million. There is no evidence that there was any indication in June 1982 that Vincent Tanna's project for the Great Western Highway property would be unsuccessful. And, for reasons given earlier, I cannot give very much weight to Mrs Saad's reconstruction of what she would have done. Despite these matters, if Mr Saad had given evidence that he did not understand the 1982 transactions and that, if he understood them, he would not have signed them, I may have felt able to find the issue of causation in favour of the Saads, on the assumption that breach of duty had been proved. However, Mr Saad did not give evidence at all, and, as I have said, his hearing problem does not avoid the Jones v Dunkel principle. I infer that Mr Saad's evidence would not have assisted the plaintiffs. In the circumstances of this case, I believe this is fatal to any claim by Mr and Mrs Saad that, if the defendants had not breached their duty, they would not have signed the mortgage. The evidence does not satisfy me that Mr Saad did not understand the effect of the mortgage; and even if I were satisfied of that much, the evidence does not satisfy me that he would not have signed the mortgage if he had understood its effect. If Mrs Saad had been disinclined to sign, and Mr Saad inclined to sign, no doubt the matter would have been discussed; and I am not able to reach any conclusion as to what the outcome of any such discussion would have been. For all these reasons, I am not satisfied on the balance of probabilities that Mrs Saad would not have signed the mortgage, if she had understood its effect. URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 21 No case was put on the basis that the Saads lost the opportunity to consider their position; and as with James Tanna, I do not in any event think that this could be regarded as a commercial opportunity of value. Accordingly, the Saads' case based on the 1982 transaction must fail." Having done so, his Honour then turned to the question of causation and damages in relation to the supplementary loan transaction. This he did in the following terms (AB 762-765): "Causation and Damages in 1983 The failure of Mr Saad to give evidence makes the question of causation difficult for the Saads in respect of the 1983 transaction, as in respect of the 1982 transaction. I am satisfied that Mrs Saad did not know of the breaches of the European Asian Bank mortgage and the Gridiger mortgage; or that she was making herself liable for a further $600,000.00 purely to remedy these breaches and to repay a loan for which she was not liable. I am satisfied that, if she had known these things, she would no longer have had the same trust in Vincent Tanna as she had before, and her belief in him as a successful businessman would have been affected. To that extent, as compared with the position in 1982, it is easier to conclude that, whatever her husband's attitude, she would not have signed the supplementary loan agreement. On the other hand, she and her husband were already committed to the $1.6 million loan, and the evidence does not make it clear what the Saads' financial position would have been if the supplementary loan agreement had not been signed. It appears likely that the Gridiger mortgage would have been called up and enforced; and this would probably have led in turn to enforcement action under the $1.6 million European Asian Bank mortgage. During the hearing, I suggested to Mr Cauchi that I would need evidence that submissions as to how the Saads' position would have been different if they had not entered into the 1983 transaction, and this matter was again discussed during final submissions. Ultimately, Mr Cauchi submitted that I could infer that, if the 1983 transaction had not been entered into, the matter would have come to a head much earlier than it did; and the liabilities would not have blown out to the extent that the shares of those liabilities referable to the parts of the advance used by the respective parties were not covered by the securities granted by those parties. In particular, he submitted, I could infer that in 1983 the share of the total liabilities referable to amounts used for Vincent's purposes would have been covered by the securities granted by Vincent. However, Mr Cauchi did not refer to evidence quantifying, at or around the end of 1983, the total amount then owing in respect of the amounts used for Vincent's purposes, or the value of securities then provided by Vincent; and I do not believe there is such evidence before me. If the evidence did satisfy me that the Saads were, in the result, substantially worse off than if they had not entered into the 1983 transaction, but did not enable me to calculate how much worse off, I would have been prepared to make my best guess, allowing for the circumstance that the necessity to guess arose from lack of evidence from the plaintiff; cf my decision in Jaffers vy Chief Commissioner for Business Franchise Licences (Tobacco) 22/7/93 at p40-p42, and cases there cited, in particular Jones v Schiffman (1971) 124 CLR 303 at 308; Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 at 183; and The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83. However, without the 1983 transaction, the property mortgaged under the Gridiger mortgage would presumably not have been available to contribute towards repayment of the $1.6 million European Asian Bank loan, plus interest 22 UNREPORTED JUDGMENTS thereon of about $58,000.00 and land tax of about $34,000.00; and I have no evidence of the value of other securities held by the European Asian Bank apart from those given by James Tanna (later sold for $440,000.00) and the Saads (later sold for $887,000.00). Accordingly, in order the (sic) find that the Saads are worse off by reason of the 1983 transaction, I would need at least to be satisfied that Vincent and/or Kenneth Tanna or the securities provided by them would then have provided more than about $360,000.00 (that is, about $1.69 million less about $1.33 million). I have not been referred to any evidence which shows this, and I do not believe there is such evidence. In those circumstances, I am not satisfied that the Saads were, in the result, worse off than if they had not entered into the 1983 transaction. This conclusion also reflects back on their case on causation. If, on the evidence, it does not appear that they were worse off entering into the 1983 transaction, it makes it more difficult to infer that they would not have done so. This, to some extent, counter-balances the considerations more favourable to finding causation, at least concerning Mrs Saad, in relation to the 1983 transaction. However that may be, the failure to prove any damages from entry into the 1983 transaction is fatal to the Saads' case on this issue." His Honour accordingly ordered that each set of proceedings be dismissed and ordered in the first proceedings that James Tanna, and in the second proceedings, that Mr and Mrs Saad, pay the respondents' costs of the proceedings. Despite the fact that, as I have earlier observed, Hodgson J was called upon to determine two disparate sets of proceedings and that it was only because the two sets of proceedings had a number of common features, that the two sets of proceedings were heard together, there was on 10 October 1996 filed a single Notice of Appeal in which Notice of Appeal (AB 773-774) the grounds of appeal taken were: "1. His Honour's Judgment was against the evidence and the weight of the evidence. 2. His Honour was in error in applying the rule in "Jones v Dunkel" to the absence of evidence from Mr Neville Saad. 3. His Honour erred in applying the rule in "Jones v Dunkel" to the evidence of James Tanna when the uncontradicted evidence was the defendants did not inform him of the nature and extent of his liability to repay the loans. 4. His Honour erred in failing to apply and/or give full weight to the principle in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642. 5. His Honour misdirected himself by holding that the test to be applied was to determine what was actually said rather than determining whether the advice was given or if given was adequate in the circumstances. 6. His Honour erred in not referring to the absence of evidence from Mr Ross Barwick and Mr Allan J Gallagher." the primary relief sought in the Notice of Appeal being that there be a new hearing of the proceedings. When the appeals came on for hearing Mr J M Ireland QC appeared with Ms J E Stuckey-Clarke for Mr and Mrs Saad and James Tanna, while Mr P M Jacobson QC appeared for the Respondents. Although, at times, I had a little difficulty in following the submissions which were advanced by Mr Ireland on behalf of the Appellants, it seemed to me that, in the end, they could be reduced to the following: URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 23 1. Hodgson J erred when he held that the Appellants had failed to establish any breach of duty in respect of the June 1982 loan since: (a) he concentrated solely upon the evidence given, on the one hand, by James Tanna and Mrs Saad and, on the other, by Mrs Hetherington, as to the explanation, or lack of it, given by Mrs Hetherington at the meeting of 7 May 1982 and did not take into account other material - as, for example, the letter written to Vincent Tanna on 29 July 1982 (see p17-p18 (above)) and that written to Mrs Saad on 24 August 1982 (see p19 (above)) which bore on that question; and (b) even if Mrs Hetherington's evidence as to her explanation be accepted in its entirety, that explanation was, in the circumstances, inadequate; 2. Hodgson J erred when he held that the Applicants had failed to establish, either, reliance upon the allegedly inadequate explanation given by Mrs Hetherington or by Mr Downey, or, that they had sustained damage by reason of their having done so since: (a) he did not have regard to evidence going to the question of reliance by James Tanna or Mrs Saad; (b) in the circumstances he erred in giving weight to the failure of Mr Saad to give evidence at all; (c) he erred in the test of causation which he applied. I turn, then, to examine these various submissions. 1. Breach of duty (a) Iam unable to accept as correct the first submission which has been made in respect of his Honour's Judgment under this heading. Contrary to the assertion, in the Appellant's written submissions (paral6), that: "In the manner in which the case was ultimately maintained at trial, the crucial issue in relation to the 1982 transaction was... whether James Tanna and Mr & Mrs Saad appreciated in consequence of Mrs Hetherington's explanation that they were liable for the whole of the loan and would have to repay the sums utilised by Vincent Tanna as well as the parts of the loan taken for their own purposes." the case which each of the Appellants sought to advance at trial was that no explanation whatsoever as to the effect of the loan transaction and the associated securities was ever given to them by the Respondents. That this was so is demonstrated by the fact that in the Affidavit which he swore on 25 April 1995, James Tanna deposed (inter alia) (AB 55-58): "28. In 1982 Vincent came to my home and said "I have got the overseas money. Come to the solicitors with me tomorrow to sign the documents so that we can get the money.' 29. I then went with him, my father, my sister Julie and her husband Neville Saad. We travelled in by train to Wynyard. It was a short walk from the station to Barwick & Co. The office was in the Angel Arcade. 30. I sat in the waiting room with my father, Julie and Neville Saad. Vincent went into an office without us. After a few minutes he came out of one office and then went into another office unaccompanied. He said something which I did not hear. The second time Vincent came back into the foyer, he asked us to accompany him into an office. In the office was a male person and female person. They were both looking at the documents when we went into the room. One of us said "Good morning'. The male replied: 'Good morning, please take a seat. Do you want a cup of tea or a cup of coffee?' I replied Coffee please'. I now know 24 UNREPORTED JUDGMENTS the male person was Terence McCabe. We were not introduced to the female person. After 1986 I was told and verily believe that her name is Hetherington. 31. After a few minutes some documents were given to Vincent. He signed first. My father signed second. He gave them to me to sign. In turn he gave the documents to the Saads. I signed the documents where indicated by Vincent. I do not know what documents I signed. I do not know how many documents I signed. It was certainly more than two. Nobody asked me to read the documents. 32. Neither of the persons asked me any questions about the document I was signing. I do not recollect any of them saying to me 'Do you understand the documents?' Nobody in the room talked about foreign currencies or used words like 'hedging'. I had no experience in foreign currency other than the time I travelled to Lebanon. 33. No one in the room mentioned anything about a loan to Gridiger or Theocahrous. No one told me of the total amount of money that was being borrowed on the documents I was signing, or what I was liable for if the loan went bad. 34. I recollect the time I spent at Barwick & Co's office was very short and including the waiting time it may have been less than three quarters of an hour. 35. I further recollect that no one asked if we wanted the documents translated into Arabic. I knew at the time that my father Kenneth Tanna was illiterate and could not read documents in English. At that time he was 78 years of age. He started wearing glasses in 1970. His hearing got worse towards the end of his life. 38. Vincent Tanna never explained to me before the meeting to sign the Loan agreement dated 28" June 1982 that Lansdowne Street was being mortgaged to support the loan to Gridiger and Theocharous. The only time he gave an explanation he said: 'You are only borrowing the money you need.' 39. I have never received any correspondence or advice from Barwick & Co. I was not given a copy of the documents I signed. I believed that I was signing documents by way of mortgage over my eight flats at 75 Prospect Street, Harris Park as security for a loan in foreign currency for the equivalent of $A 140,000.00. I did not know in which currency the loan was being made. I believed that the interest rate was 6.5% and that the terms (sic) of the loan was five years. I only believed this because my brother Vincent told me these things." No oral evidence was given in chief by James Tanna on the hearing before Hodgson J in relation to the meeting of 7 May 1982. In the Affidavit which she swore, Mrs Saad deposed (inter alia) as follows (AB 78-80): "36. From time to time I had further discussions with my brother Vincent regarding the proposed loan from European & Asian Bank. In early 1982 and prior to signing any documentation my brother Vincent said words to the effect 'The loan has been approved. I will make arrangements to complete as soon as possible. We should all use the one solicitor. I will make the arrangements.' Iam informed and believe that a loan approval was granted by the European & Asian Bank. 37. I was not aware of the exact terms and conditions of the loan approval. I believed that my husband and I would be borrowing sufficient monies to discharge our existing liability to the Perpetual Trustee Company and that from the date of settlement thereafter we would be paying a reduced rate of interest and would therefore have more funds available for our own purposes. URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 25 38. At no time did any office of the Bank or any other person explain to me or my husband the exact terms and conditions of the proposed loan. 39. I cannot read or write English but I am able to sign my name. My native language is Lebanese. I can understand very simple spoken English. 40. I recall that my brother Vincent contacted me and said words to the effect 'The loan documents are ready. We have to go to Barwicks office to sign them'. In or about May/June 1982 I, together with other members of the family travelled to Barwick & Co's office in the city. Present were Neville Saad, Vincent and Teresa Tanna, Kenneth Tanna, James Tanna and Mr Terry McCabe, Solicitor, and another employee of that firm whose name I do not remember. 41. We were shown from the reception area into an office. Mr McCabe Solicitor said words to the effect of "You must all sign these forms where I show you.' Each of us then signed the documents where we were told to sign. I do not recall the title of such documents or the number or type of such documents. The nature and effect of the documents were not explained to us by McCabe or anyone at all. Each of us then signed on the documents where we were told to sign by Mr McCabe. I did not understand at that time the effect of the documents that I was signing other than they were something to do with the loan arrangements. I was aware that it involved the repayment of our existing loan arrangement. 42. At no time did Mr McCabe or the other member of his office staff who was present, whose name I do not recall, explain to us what the documents were; or suggest we see another solicitor... 43. I believed that my husband and I were borrowing approximately three hundred and sixty one thousand ($361,000.00) which was sufficient to discharge our existing mortgage to the Perpetual Trustee Company and enough to cover some legal costs. I now believe that the settlement of the discharge of our mortgage to Perpetual Trustee Company and our subsequent mortgage to the European & Asian Bank took place on 28" June, 1982." Given the case which the Appellants sought to make on the hearing before Hodgson J, it was inevitable that his Honour should concentrate on the meeting of 7 May 1982 in order to determine, if he could, what, if any, explanation as to the documents and their effect was given to the Appellants. In the event, as I have earlier recorded, Hodgson J did not accept the Appellants' evidence that they had been given no explanation whatsoever. (b) Nor am I able to accept the correctness of the second submission advanced on behalf of the Appellants in respect of this part of his Honour's Judgment. The Appellants' Written Submission dealt with this matter in the following way: "8. Upon Mrs Hetherington's evidence, only the last sentence at AB 140B-C was capable of conveying to the Saads and the Tannas the true effect of the documents, namely the words: 'If you fail to pay you will all be liable and each one of you will be individually liable." But that sentence was unclear because it did not convey: (a) that each one of the borrowers would be individually liable for the whole of the $.6 million; (b) that their individual securities and their other assets could be taken by the Bank in satisfaction of its claim; or (c) that the Bank could choose to pursue one or more of the borrowers and not the others. 26 UNREPORTED JUDGMENTS On her own evidence, Mrs Hetherington gave an unsatisfactory explanation and his Honour ought to have found that her duty was breached." As has been noted above (see p30-p32 (above)), Hodgson J, in the course of his Judgment, concluded: "T believe that something to the effect of Mrs Hetherington's evidence was said by her, although I cannot be confident as to its details." Mrs Hetherington's evidence (AB 139-140) was that her explanation included words to the effect of the following: "You are paying out the old mortgages on your properties and are all becoming borrowers under the new loan. If you don't pay on the dates set for payment you will be in big trouble. You are putting your properties up for security for the money. If you don't pay by the set dates the bank can send you a letter or a notice requiring you to repay the whole amount. So you will all have to pay the whole amount. The bank can take you to court to make you pay and can take all your properties. The bank can take the properties and sell them and if there is not enough to pay then the bank can take you all to court. You will get into legal and financial problems if you don't pay. If you fail to pay you will all be liable and each one of you will be individually liable." The repeated reference to "all", whether as borrowers, or as persons whose properties had been provided by way of security and who could be called upon to pay the whole of the loan, in my view, was more than adequate to convey the ideas which, so the Appellants would have it, were not conveyed by the last sentence in what Mrs Hetherington says was her explanation. 2. Reliance and causation (a) I am unable to accept as correct the first submission advanced by the Appellants in respect of this part of Hodgson J's Judgment. Insofar as it relates to other material said to show reliance by James Tanna, the Appellants' Written Submissions were in the following terms: "32. It is submitted that in evaluating the issues of reliance and the causation as they affected James Tanna, Hodgson J overlooked: (a) James Tanna's evidence concerning the ANZ Bank mortgage (AB 1/52T-Z); (b) his own finding that James Tanna did not understand that he and his property would be liable for the whole of the EAB mortgage and the Gridiger mortgage, if the other borrowers (especially Vincent Tanna) did not pay the shares of the advance and interest thereon representing the amounts applied to their benefit (AB 754H-M); (c) James Tanna's expressed belief as to the effect of the 1982 mortgages which he signed (AB 1/57Z-58E)." The evidence referred to in the first of these points was contained in James Tanna's Affidavit. It was to the following effect (AB 52): "16. I now understand that a mortgage was taken out some time in July 1981 with the Australia & New Zealand Banking Group for a sum of approximately AUD$1 million over property owned by my father and Vincent Tanna including the property in Lansdowne Street. I now understand that that mortgage document was executed by myself along with my older brother Vincent Tanna, his wife and my father as the property loan was secured over one of the properties at URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 27 Lansdowne Street of which I was a third owner. I have no recollection of signing that mortgage or going to the ANZ Bank. At no stage was that mortgage document explained to me." Bearing in mind the fact that Hodgson J found, as a fact, that the mortgage had been entered into by James Tanna, and the further fact that, when dealing with the question of the credibility of James Tanna and Mrs Saad, his Honour expressed the view "that both these plaintiffs were over-reluctant to acknowledge their signatures to documents and to acknowledge awareness of transactions (quite apart from the subject transactions)" it can hardly be said that his Honour was bound to accept James Tanna's evidence as to the ANZ Bank mortgage. So far as the second of these points is concerned, it is not correct to say that his Honour found that James Tanna did not understand that he and his property would be liable for the whole of the EAB mortgage and the Gridiger mortgage if the other borrowers (especially Vincent Tanna) did not pay the shares of the advance and interest thereon representing the amounts that applied to their benefit. The relevant passage in his Honour's Judgment has been earlier set out by me (see p32 above)) and a reading of that passage makes it clear that what the Appellants describe as a "finding" is no more than a statement of what his Honour would have found if he had held that James Tanna had established a breach of duty on the part of the Respondents to him in relation to the June 1982 loan transaction. The evidence relied upon in relation to the third of these points has been set out by me above (see p42 (above)). Given Hodgson J's rejection of the Appellants' claim that they were given no explanation whatsoever as to the nature and effect of the June 1982 loan transaction, and the comments which he made as to the credibility of James Tanna and Mrs Saad, there was, in my view, no reason whatsoever why his Honour should have accepted James Tanna's assertion as to his belief in relation to the 1982 mortgages. The submission which, in this regard, was made in relation to the evidence of Mrs Saad was put in the Appellants' Written Submissions in the following terms: "35. On the issues of causation and damages, in regard to Mr and Mrs Saad in connection with the 1982 transaction, Hodgson J noted the evidence of Mrs Saad that 'if she had understood the European Asian Bank mortgage made her liable for the whole $1.6 million, she would not have signed it' (AB 4/760A-C) and taking into account his general observation as to the credibility of Mrs Saad, his Honour concluded 'I cannot give very much weight to Mrs Saad's reconstruction of what she would have done' (AB 4/760L-M). Pausing there, it is difficult to reconcile the importance which Hodgson J attributed to the lack of such a statement by James Tanna with the treatment given to the weight of the same statement when given in evidence by Mrs Saad. In the case of James Tanna, the flavour of his Honour's Judgment on the issue of reliance and causation, seemed to require a form of 'incantation' by James Tanna, whilst in the case of Mrs Saad that evidence was given very little weight." With respect, it seems to me that that submission completely overlooks what I regard as certain important matters. First, it is to be noted that, neither in her Affidavit, or in oral evidence in chief on the hearing before Hodgson J, did Mrs Saad give any evidence directed to the question of reliance or causation. Second, it is to be noted that, at the commencement of the fourth hearing day, and while Mrs Saad was still in the course of being cross-examined, Hodgson J raised with Mr Jacobson, who then appeared, as he did on the hearing of the appeal, for the Respondents, the possibility of his asking questions of Mrs Saad as to the course 28 UNREPORTED JUDGMENTS of taken which she would have taken if - as she said was not the case - she had understood the nature and effect of the documents in question (T 95-87). Third, that notwithstanding Mr Jacobson's objection to his Honour taking that course, Hodgson J then - with Mr Jacobson objecting to each of the questions put by his Honour - put those questions to Mrs Saad (T 87-88). Fourth, the Transcript (T 88) records the following after his Honour had put those questions: "HIS HONOUR: I do not believe I will give weight to those answers which they do not deserve. I am essentially doing it to avoid a Jones v Dunkel argument and to avoid the possibility that you refrained from cross-examining because it had not been implicitly put. JACOBSON: I had intended to refrain from cross-examination on that basis. HIS HONOUR: It would be unfortunate if the case fell to be decided in those circumstances. " (b) The Appellants' submission in respect of this challenge to his Honour's Judgment was, in the Written Submissions, put as follows: "38. In relation to Mr Saad, it is submitted that the principle in Jones v Dunkel only arises where the failure of a party to call a relevant witness is unexplained. Here the language and hearing difficulties experienced by Mr Saad at the time of the transaction were sufficient to provide an explanation. His Honour's conclusion that 'his hearing problem does not avoid the Jones v Dunkel principle'(AB 4/760T-U) was not correct." Iam unable to accept the correctness of this submission. The mere fact that an explanation is put forward does not lead inevitably to the conclusion that the appropriate inference cannot be drawn; it is only so if the explanation which has been put forward is a sufficient explanation for the failure to call the witness in question. In the present case, bearing in mind what the evidence revealed as to Mr Saad; what the evidence revealed as to discussions which Mrs Saad claimed to have had with Mr Saad concerning their block of units in Meehan Street; and what the evidence revealed as to the prior business activities of Mr and Mrs Saad, it was open to his Honour to conclude - as, indeed, I would, in the circumstances, have concluded - that no sufficient explanation for the failure at least to obtain an Affidavit from Mr Saad, had been put forward. (c) In their Written Submissions the Appellants put their challenge to this part of Hodgson J's Judgment in the following way: "34. Hodgson J erred on the issue of causation in failing to recognise that this was a case in the second category described by Millett LJ in Bristol & West Building Society v Mothew [1997] 2 WLR 436 where his Lordship said: "Where, however, a client sues his solicitor for having negligently given him incorrect advice or for having negligently given him incorrect information, the position appears to be different. In such a case it is sufficient for the plaintiff to prove that he relied on the advice or information, that is to say, that he would not have acted as he did if he had not been given such advice or information. It is not necessary for him to prove that he would not have acted as he did if he had been given the proper advice or the correct information.' cf Hodgson J's disagreement with this view writing extra-judicially Vol 71 ALJ 596-597." Bristol and West Building v Mothew? involved a claim by a Building Society which had advanced moneys to enable intending purchasers to complete the purchase of a residential property, to recover from a solicitor who had acted for 2. supra URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 29 both the purchasers and the Society, damages for negligence. The Society had offered to advance the money on the express condition that the balance of the purchase price was provided by the purchasers without resort to further borrowing, and it instructed the solicitor to report, prior to completion, any proposal that the purchasers might create a second mortgage or otherwise borrow in order to finance part of the purchase price. The solicitor knew that the purchasers were arranging for an existing bank debt of £3,350.00 to be secured by a second charge on the new property but, due to an oversight, he stated in his report to the Society that the balance of the purchase price was being provided by the purchasers without resort to further borrowing. When the purchasers defaulted on their mortgage repayments, the Society enforced its security and the house was sold at a loss. The Society sought to recover the whole of its loss on the transaction from the solicitor, alleging breach of contract, negligence and breach of trust. The Society having obtained summary judgment, the solicitor appealed. On that appeal, two questions were argued: 1. whether the finding of liability against the solicitor could stand; and 2. if so, what was the proper measure of damages which the Society was entitled to recover. (So far as the second question was concerned, Millett LJ - with whom, on this aspect of the matter, Otton and Staughton LJJ agreed - did no more than indicate that the measure of damages to be applied was that which had been laid down by the House of Lords in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd3 the decision in which was given after the conclusion of argument in the Court of Appeal in Bristol and West Building Society v Mothew. It might be noted that, although the decision of the House of Lords in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd has recently been applied in two similar cases in this country (Trust Co of Australia v Perpetual Trustees WA Ltd4; MGICA (1992) Ltd v Kenny & Good Pty Ltd5) the High Court, on 19 May 1998, granted special leave to appeal from the decision of the Full Court of the Federal Court in MGICA (1992) Ltd v Kenny & Good Pty Ltd in order that the question might be argued®). The relevant part of the Judgment of Millett LJ in Bristol and West Building Society v Mothew is as follows7: "In the present case the society's claim is not for misrepresentation. Accordingly, questions of inducement and materiality are not relevant. Its claim lies in negligence, and the relevant concept is reliance. In considering the issue of causation in an action for negligence brought by a client against his solicitor it appears from Downs v Chappell that it is necessary to distinguish between two different kinds of case. Where a client sues his solicitor for having negligently failed to give him proper advice, he must show what advice should have been given and (on a balance of probabilities) that if such advice had been given he would not have entered into the relevant transaction or would not have entered into it on the terms he did. The same applies where the client's complaint is that the solicitor failed in his duty to give him material information. In Sykes v Midland Bank Executor 3. [1997] AC 191 4. (1996-1997) 42 NSWLR 237 5. (1995-1996) 140 ALR 313; Lindgren J (1997) 147 ALR 468; (Fed Ct FC) 6. (1998) ACLR Issue 7 p10 7. [1998] Ch 11; [1997] 1 WLR 443; [1996] 4 AER 705-6 30 UNREPORTED JUDGMENTS and Trustee Co Ltd [1971] 1 QB 113, which was concerned with a failure to give proper advice, the plaintiff was unable to establish this and his claim to damages for negligence failed. In Mortgage Express Ltd v Bowerman & Partners [1996] 2 All ER 836, which was concerned with a failure to convey information, the plaintiff was able to establish that if it had been given the information it would have withdrawn from the transaction and its claim succeeded. Where, however, a client sues his solicitor for having negligently given him incorrect advice or for having negligently given him incorrect information, the position appears to be different. In such a case it is sufficient for the plaintiff to prove that he relied on the advice or information, that is to say, that he would not have acted as he did if he had not been given such advice or information. It is not necessary for him to prove that he would not have acted as he did if he had been given the proper advice or the correct information. This was the Position in Downs v Chappell [1997] 1 WLR 426. In the present case the society makes complaints of both kinds. It alleges that the defendant negligently and in breach of his instructions failed to report the purchasers' proposed arrangements with the bank prior to completion. This is a claim of the first kind, and if it were all the society would have to establish that if it had been informed of those arrangements it would not have proceeded with the mortgage advance. But the defendant went further than this. He did not merely fail to report the arrangements to the society; he expressly represented to the society that no such arrangements existed. That brings the case within the second category. It follows from the decision of this court in Downs v Chappell that it is sufficient for the society to prove that it relied on the representations in the report. Although the judge spoke in terms of inducement, he plainly found reliance. The society's procedures were designed to ensure that no cheque would be issued in the absence of a satisfactory report from its solicitor. In my judgment we are bound by the decision in Downs v Chappell to hold that the necessary causal link between the defendant's negligence and the mortgage advanced was proved." Downs v Chappell8 was a case in which purchasers of a business sued to recover damages in respect of the loss which they claimed to have sustained as the result of the vendor's fraudulent representation as to the annual turnover and gross profit of the business, the correctness of which representations were verified by the second defendants, a firm of accountants. At first instance, the question of liability was found in favour of the plaintiff against each of the vendor and the firm of accountants, but the trial judge concluded, on the issue of causation, that the plaintiffs had not established, on the balance of probabilities, that they would not have completed the purchase had the true figures been disclosed and, accordingly, that they had not suffered any loss as the result of the defendants' torts. On appeal, it was held that, as the plaintiffs had established that were induced to enter into the agreement to purchase by the fraudulent and material representations of the vendor, and their negligent verification by the firm of accountants, they had established their case on causation and it was unnecessary to consider how they would have acted if they had been told the truth; and that the only remaining question was the quantum of the loss the plaintiffs had suffered as a result of entering into the agreement to purchase. 8. [1997] 1 WLR 426; [1996] 3 AER 344 URJ TANNA v DEUTSCHE BANK (ASIA) AG; SAAD v BARWICK (Powell JA) 31 Although - since Bristol and West Building Society v Mothew9 involved a positive representation by the solicitor that the balance of the purchase price was being provided by the purchasers without resort to further borrowing, it could be said that the approach taken by the Court of Appeal in Downs v Chappell!9 dictated the result come to in the latter case, I would question whether the dichotomy indicated by Millett LJ in the passage from his judgment which I have set out above, will always be correct. But, even if that dichotomy be correct, it seems to me - contrary to the submission advanced on behalf of the Appellants - that the present case was one which would fall within the first class of case suggested by his Lordship. The Appellants' case here is, not that the Respondents gave positive advice which was wrong or gave them information which was wrong, but that the Respondents failed in relation to the June 1982 loan transaction to give them adequate advice and, in relation to the November 1983 transaction, failed to advise them of the breaches which had occurred in relation to the June 1982 loan by the Bank and in relation to the loan made by Mr Gridiger and his associates. That being so, the Appellants bore the onus - which they did not discharge - of showing what the advice should have been and, on the balance of probabilities, that, if such advice had been given, they would not have entered into the relevant transactions or would not have entered into them on the terms which they did. For these reasons I would propose that the appeal in each proceedings be dismissed, the Appellants to pay the Respondents costs of the appeal. Appeal dismissed. Counsel for the appellants: J M Ireland QC and Ms J E Stuckey-Clarke Solicitors for the appellants: Collins & Thompson (Hornsby) Counsel for the respondents: P M Jacobson QC Solicitors for the respondents: Phillips Fox 9. supra 10. supra