By Paul Kozub and Natalie Sullivan -
Snapshot
- A recent Supreme Court decision confirms solicitors have an obligation to advise clients on obvious practical implications of transactions which are the subject of advice.
- Solicitors should ensure that any obvious pitfalls in the legal obligations being entered into are explained in sufficient detail.
The recent decision of Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23 is a useful example of a situation in which a solicitor’s obligation to advise on a loan agreement was found to extend to the practical implications of the transaction.
Background
Commercial N Pty Ltd (‘Lender’) brought proceedings against Ms Huang and Ms Chien (‘Borrowers’) who had defaulted on their loan. The Lender sought recovery of the unpaid principal of the loan and a significant amount of interest.
Under the terms of the loan agreement, the principal sum was repayable with interest. The interest was capitalised and compounded monthly, and charged at a rate of 0.35 per cent per week (‘Lower Rate’) or 1.36 per cent per week (‘Higher Rate’). The Higher Rate was applicable at all times unless the Lender notified the Borrowers the Lower Rate was to apply, with the Lower Rate operating as an incentive for prompt payment. If there was any default, the Higher Rate would apply.
