A LAW firm should not be held accountable for all
of the losses incurred under a fraud which used false mortgages to scam
a finance company of more than $1 million.
In a High Court of Australia judgment handed down on
Wednesday in Canberra, a majority of judges found solicitors Hunt and Hunt
were negligent in their drafting of mortgage documents.
But finance firm Mitchell Morgan Nominees, which used Hunt
and Hunt in the transaction, would never have needed to take out the
mortgage had it not been induced by a pair of fraudsters.
The High Court decision overturns a NSW Court of Appeal
ruling, which found Hunt and Hunt wholly responsible for the loss.
The firm had been ordered to pay Mitchell Morgan damages
of $2.3 million, calculated on the initial $1 million loss and interest
based on the high rates in the loan agreement.
But the High Court said Hunt and Hunt should not be held
wholly responsible as losses from negligent drafting was distinct from
losses caused by the fraud.
The complex case dates back to 2005, when Angelo Caradonna,
also known as Antonio or Tony Caradonna, launched a business venture with
Rebels bikie gang boss Alex Vella to sell tickets to a boxing match between
Anthony Mundine and Danny Green.
They opened a joint bank account and Caradonna
subsequently obtained certificate of title to a property owned by Mr Vella.
He used it without Mr Vella's knowledge to apply for a
loan from Mitchell Morgan.
Caradonna forged Mr Vella's signature on various loan
He used his solicitor, his cousin Lorenzo Flammia, to make
a false representation to Mitchell Morgan's lawyers, Hunt and Hunt, that he
had witnessed Mr Vella signing the required documents.
In January 2006, $1 million paid into the account.
The same day, Caradonna forged Mr Vella's signature on a
number of cheques and withdrew the lot.
Caradonna and Flammia ended up bankrupt.
In 2010, Caradonna pleaded guilty to an array of fraud
offences, which also included remortgaging a Rebels clubhouse.
He's currently in jail until at least 2016.
The High Court reinstated the initial assessment of Hunt
and Hunt's liability at 12.5 per cent of the $1 million lost through the
false mortgage, plus interest.