I regularly receive phone calls from people asking me to witness their signature. When I enquire further about what they are signing, usually they clarify it is just some loan documentation from a lender and it’s only about 100 to 150 pages! They then admit that the lender requires them to sign a statutory declaration that they received independent legal advice.
These same people then seem mystified that for me to “witness their signature” I am required to read the loan documentation and advise them on it, a process which could take a few hours. And always they are in a hurry and need my signature urgently.
So, I was greatly interested when I became aware of the recent case of Commercial N Pty Limited v Huang & Ors & Ors [2024] NSWSC 23 which confirms that solicitors have a duty to not only explain the legal effect of the document to a client before signing but to also advise on the obvious practical implications of a proposed transaction (like a loan) in sufficient detail.
In that case a solicitor was found not to have properly explained to a client the implications of a capitalised higher interest rate in the case of default by the borrower under the loan. Luckily for the solicitor the Court found that the interest rate provision was void for being oppressive and unconscionable and, accordingly, he did not cause the loss suffered as a result of the borrower’s default.
In any case, when it comes to any legal document involving a transaction be it a loan, a lease, a contract for the sale of real estate etc. a solicitor is under a duty to not only explain the legal effect of the document but to explain in detail the obvious practical pitfalls that could arise from entering into the transaction. In other words, it’s not just a matter of witnessing a signature!
May 2024