Professional Negligence

Client seeking insolvency advice walks away happy after Roberts Crosbie Mortensen identified and settled a claim for professional negligence against the previous Solicitor.

The client had engaged a local Solicitor to act in relation to a purchase of a business. The client intended to draw down money from his Superannuation and advance it to a related company to fund part of the purchase price. The balance of the price was to be paid post completion.

The client’s related entity had failed to pay the post completion payment and was sued by the vendor of the business. The vendor obtained Judgment against the client’s related entity purchasing company and subsequently an Order appointing a Liquidator to wind up the company.

The client had lost approximately $350,000.00, the money that he had withdrawn from Super and advanced to the related company, and remained an unsecured creditor in the liquidation.

The client had also signed a personal guarantee of his company’s obligations under a Lease of the premises from where the business had operated. Rent of approximately $7,000.00 was owing to the Lessor.

Approximately two (2) years after the company had failed the Lessor commenced recovery proceedings against the client under his guarantee.

The client sought advice from Roberts Crosbie Mortensen  in relation to the Court proceedings and his personal insolvency.


The client had lost approximately $350,000.00

By asking probing questions in relation to how the client had gotten himself in this his financial position in the first place, Roberts Crosbie Mortensen identified a prima facie case in professional negligence against the local Solicitor.

After considering the matter, Roberts Crosbie Mortensen advised that the Solicitor had been negligent for failing to advise the client to loan his money to his related company under a Loan Agreement that created a security interest under the Personal Property Securities Act. Roberts Crosbie Mortesen observed that had such a Loan Agreement been entered into the client would have been entitled to appoint a receiver of the company following its insolvency and the business could have been sold as a going concern. Consequently, it was argued that, as the client would have been the only secured creditor, provided the business could have been sold for at least the loan amounts he would have been able to receive 100% of the loan made to his related company.

Roberts Crosbie Mortensen issued a detailed letter of demand and the matter was promptly referred to the Solicitor’s Professional Indemnity Insurer, LawCover.

After a brief exchange of correspondence with LawCover’s Solicitors and legal argument in relation to the insured’s duty of care, the foreseeability of the loss, and whether the client’s Accountant should share part of the liability the claim was settled at an informal settlement conference with the client recovering the amount of his loan less only the approximate costs that he would have incurred had a receiver been appointed to sell the business.

Professional Negligence Lawyers for Sydney and Newcastle

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