Abel v State Trustees Limited
[2012] VSC 425
•21 September 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2010 5337
| MARINA ABEL | Plaintiff |
| v | |
| STATE TRUSTEES LIMITED (ACN 064 593 148) | Defendant |
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JUDGE: | ZAMMIT AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 August 2012 | |
DATE OF JUDGMENT: | 21 September 2012 | |
CASE MAY BE CITED AS: | Abel v State Trustees Limited | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 425 | |
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NEGLIGENCE – Duty of care – Loss of benefit to potential beneficiary – Whether duty owed – Economic loss
PROCEDURE – Summary dismissal and duty of care – Whether no real prospect of success – Sections 63 and 64 of the Civil Procedure Act 2010 (Vic) – Order 23.01 of the Supreme Court (General Civil Procedure) Rules 2005
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Newton | Ian Symonds and Associates |
| For the Defendant | Dr I.J. Hardinghan QC with Mr A. Herskope | Maddocks |
HER HONOUR:
The defendant, State Trustees Limited (“STL”) filed a summons dated 15 June 2012, seeking summary judgment for the defendant pursuant to s 63(1) of the Civil Procedure Act 2010 (Vic) (“CPA”) or alternatively that the proceeding be stayed or there be judgment for the defendant pursuant to r 23.01(1)(a), (b) and (c) of the Supreme Court (General Civil Procedure Rules) 2005.
The defendant relies upon the affidavits of Siobhan Anne Sheppard sworn 14 June and 3 August 2012.
The plaintiff, Marina Abel, filed a statement of claim dated 23 September 2010.
On 17 July 2012, the defendant’s solicitors received an email transmission from the plaintiff’s solicitors attaching a document entitled “Amended Statement of Claim”.[1]
[1]Affidavit of Sibhan Anne Sheppard sworn 3 August 2012, Exhibit 8.
At the date of the hearing of this application, leave has not been sought by the plaintiff to file and serve the proposed “Amended Statement of Claim”.
The defendant’s submissions referred to the proposed amended statement of claim and the facts as pleaded in the proposed amended statement of claim were accepted by the defendant for the purpose of this application.
Background
On 25 July 2006, Phyllis Margaret Hill (“Jean”) transferred title to a farming property Glendale Road, Taggerty to her daughter‑in‑law, Robyn, the wife of Jean’s son. The plaintiff is Jean’s daughter.
Jean was born on 27 April 1923 and died on 11 October 2009, aged 86 years.
On 13 December 2006, STL was appointed by the Victorian Civil and Administrative Tribunal (“VCAT”) as administrator of Jean’s estate pursuant to s 43 of the Guardianship and Administration Act 1986 (Vic) on the ground that she was not capable of managing her financial affairs.
Until the death of John Hill, Jean’s husband, he and Jean were the joint registered proprietors of the Taggerty farm.
The transfer dated 26 July 2006 of the farm to Robyn is said to have operated to the benefit of both Robyn and Robert.
On 20 June 2007, STL, on behalf of Jean, commenced a proceeding in the County Court seeking, amongst other things, orders that the farm be retransferred to Jean.
On 8 February 2008, on Jean’s behalf and as Jean’s administrator, STL entered into terms of settlement (“the settlement”) of the County Court proceeding, which included provisions that Robyn agree to make payment to STL (as administrator for Jean) in the sum of $700,000 within nine months of the date of settlement.
As noted, Jean died on 11 October 2009.
On 16 February 2011, letters of administration for Jean’s last will dated 3 August 2006, were granted to Robert.
On 12 July 2011, Jean’s daughter, Marina Abel, instituted a proceeding in the Supreme Court of Victoria seeking revocation of the grant in respect of Jean’s will dated 3 August 2006 and a further proceeding seeking relief under Part IV of the Administration and Probate Act 1958 (Vic).
By terms of settlement dated 21 September 2011, the Part IV proceeding and the revocation proceeding were settled, in return for an all-in payment of $548,473.50 to Marina Abel. Ms Abel released the estate from any further claim by her including “all past present or future rights to receive any further distribution of estate of the Deceased under any will or intestacy”.
In the present proceeding, Ms Abel seeks damages in negligence from STL on the basis that STL acted negligently towards her when it settled the County Court proceeding brought against Robyn (as transferee of the farm property) during Jean’s life.
At paragraphs 18 and 19 of the proposed “Amended Statement of Claim” the plaintiff pleads:
18.In the circumstances pleaded in paragraphs 15, 16 and 17 hereof the defendant, in carrying out its duties as administrator of Jean’s estate pursuant to s 43 of the Guardianship and Administration Act 1986 owed a duty to Marina to take reasonable care not to cause loss or damage:
(a)to Jean’s estate; and
(b)to Marina as a likely beneficiary of Jean’s estate.
19.In the circumstances pleaded in paragraph 14(a), (b) and (c) hereof of the defendant failed to take reasonable care in carrying out its said duties as administrator of Jean’s estate pursuant to s 43 of the Guardianship and Administration Act 1986 in:
(a)managing Jean’s financial affairs;
(b)the manner in which it conducted the County Court proceeding on behalf of Jean;
(c)entering into the settlement.
In paragraph 20 of the proposed “Amended Statement of Claim” the plaintiff pleads that as a consequence of STL’s failure to take reasonable care, the plaintiff has suffered loss and damage.
Defendant’s submission
Put simply, the defendant submits that there is no basis upon which it can be contended that STL owed a duty of care to anyone other than Jean when it settled the County Court proceeding on her behalf. The defendant relies upon the decision of Hill v Van Erp (“Van Erp”).[2]
[2](1997) 188 CLR 159.
In Van Erp, the High Court of Australia considered whether a solicitor who prepared a will on their client’s instructions was liable in damages to a third party beneficiary, where the will was not properly executed due to the negligent actions of the solicitor and where the beneficiary suffered a loss of their intended distribution under the will.
The Court[3] held that the solicitor was in breach of the duty of care owed to the intended beneficiary and hence was liable in damages for the intended distribution.
[3]Brennan CJ, Dawson, Toohey, Gaudron and Gummow JJ and McHugh JJ dissenting.
The members of the Bench gave differing reasons for arriving at their decision which were as follows:
Per Brennan CJ:
· A breach of the solicitor’s retainer by failing to use reasonable care in the preparation of a will is also a breach of the solicitor’s duty to an intended beneficiary who thereby suffers foreseeable loss upon the death of the testator.
· The duty owed by the solicitor does not arise by reason of an assumption of responsibility by the solicitor to the intended beneficiary but is imposed by law.
Per Dawson and Toohey JJ:
· The relationship between the solicitor and the intended beneficiary was one of proximity which did give rise to a duty of care.
· Although the claim was for pure economic loss, there was no reason to deny a duty to prevent that loss because (a) there was no prospect of indeterminate liability; (b) the class of persons to whom the duty was owed was readily ascertainable; (c) creating the duty did not diminish any competitive advantage a solicitor might have; (d) the duty did not supplant or supplement other legal remedies; and (e) its existence did not disturb any general body of rules constituting a coherent body of law.
· The solicitor accepted responsibility for carrying out her client’s testamentary intentions and thereby undertook the duty of ensuring the intention was realised. In a factual if not a legal sense there was an assumption of responsibility to the intended beneficiary. The duty existed whether or not the intended beneficiary knew of the disposition.
Per Gaudron J:
· Where a plaintiff has suffered loss or impairment of a precise legal right, the need for a special relationship of proximity is less stringent than in other cases of pure economic loss.
· The loss suffered in this case was not pure economic loss, but a loss of a precise legal right which, in turn, resulted in economic loss.
· Control is an important factor in determining proximity. The control that the solicitor had over whether the intended beneficiary would acquire a right to the estate gave rise to a relationship of proximity. A person in such a position of control owed a duty of care to take reasonable steps to prevent reasonably foreseeable loss, unless there was an overriding inconsistent duty.
Per Gummow J:
· Where the client suffers no loss by reason of the solicitor’s breach of contract and an intended beneficiary is not a party to that contract, the law of tort operates to complete and vindicate fulfilment of the contractual obligation.
· The factors that give rise to a duty to an intended beneficiary under a will a solicitor is retained to procure are (a) the retainer to enhance the economic position of the intended beneficiary; (b) the control exercised by the solicitor over the realisation of the testamentary intentions; (c) the closeness of the solicitor’s acts and its direct legal effect, being the failure of the gifts; and (d) the public interest in promoting professional competence and the avoidance of disappointed of testators and beneficiaries by negligent actions of the solicitor.
· There is a real difficulty in treating the requirement of the relationship of proximity as an overriding requirement which provides a conceptual determinant (or a determinant) for the recognition of the existence of a duty to take reasonable care to avoid reasonably foreseeable risk of injury.
The reasons provided in Van Erp illustrate the fragmenting of the treatment of the proximity requirement in the High Court. Van Erp’s case is better known for its discussion of proximity in relation to duty of care. In determining that a duty of care did exist, the level of control the defendant’s solicitor had over the situation of the plaintiff as a beneficiary was important.
The defendants relied upon the reasons given by Dawson, Toohey and Gummow JJ in Van Erp’s case and in particular the passage in Dawson J’s judgment with whom Toohey J agreed:[4]
These circumstances distinguish the present case from others in which a solicitor has been held to owe no duty to anyone other than his client. No doubt that is a general rule. … And in Clarke v Bruce Lance & Co no duty was owed by a solicitor to a prospective beneficiary under a client’s will in relation to a proposed dealing with property during the client’s lifetime.
[4]Hill v Van Erp (1997) 188 CLR 159 at 187.
Clarke v Bruce Lance & Co,[5] considered whether a solicitor who acted for a testator in preparing a will owed a duty of care to a beneficiary adversely affected by subsequent transactions. The Court held that the solicitor owed no duty of care to a beneficiary when acting for the testator in a subsequent transaction, which adversely affected the value of a beneficiary’s assets.
[5][1988] 1 WLR 881; [1998] 1 All ER 364.
In summary, the facts were that the testator, the plaintiff’s father, executed a will which had been prepared by the defendant’s solicitor. Under this will the plaintiff was the devisee of a service station. Subsequently, the grantor granted a lease of the station to a third party and the solicitors drew up the variation of the lease, in effect giving the lessees an option to purchase after death at a fixed price. By the time of death the value of the station had risen substantially. The beneficiary sued for negligence, claiming that the solicitors owed a duty of care to him as a beneficiary.
In the course of Balcombe LJ’s judgment His Honour considered factors to be material and which had been considered in Ross v Caunters [1980] Ch 297 and Gartside v Sheffield Young and Ellis.[6] His Honour said at 888:
1.There was no close degree of proximity between the plaintiff and the defendants. The plaintiff had a potential interest in the Kingshill Service Station under the testator’s will made in 1973. When the defendants were instructed by the testator to prepare the 1979 deed of variation, which included the option over the Kingshill Service Station in the favour of Hoare, there is no reason why they should have been expected to contemplate the plaintiff as a person likely to be affected by any lack of care on their part: the testator was free to deal with the property during his lifetime in any way he wished, and the defendants’ duty was to carry out his instruction. Thus he could have made a gift of the Kingshill Service Station to someone else, or he could have altered his will - in either case the plaintiff’s potential interest would have been defeated. In no way can it be said that the defendants’ contemplation of the plaintiff, in relation to the grant of option, was “actual nominate and direct”.
2.The transaction (the preparation of the deed of variation, including grant of the option in which the defendants were retained by the testator, did not have as its object the benefit of the plaintiff. Far from the interests of the testator and the plaintiff marching hand in hand, there was an obvious conflict of interest. Supposing the defendants had warned the testator that the option he wished to grant to Hoare was improvident from the point of view of the persons who might ultimately become entitled to the property after the testator’s death, then in the context of the fact that the option formed one term of the larger transaction (the deed of variation) into which the testator wished to enter, he might well have instructed the defendants to go ahead in any event. But if they owed a duty of care to the plaintiff, they would have to be bound to try and dissuade him - an intolerable position for any solicitor. Thus, this case is the exact opposite of the position in Ross v Caunters [1980] Ch 297, where it was accepted that the testator would have made a valid will in favour of the beneficiary had he been warned by the solicitors.
3.If the defendants were under a liability to a potential beneficiary of the property it cannot have been to the plaintiff alone. As a matter of logic, the plaintiff, at the time of the grant of the option, was in no different a position viz-a-viz the defendants and anyone to whom the testator might have given the property during his lifetime, or to whom it might pass under his will or intestacy. So if the defendants owed a duty to anyone other than their client, the testator, it must have been to the whole of this indeterminate class of potential donees or beneficiaries. It would indeed have exposed them “to a liability in an indeterminate amount for an indeterminate time to an indeterminate class”.
4.This is not a case where, if the plaintiff has no cause of action in negligence, there is no other effective remedy. If the defendants were negligent in failing to advise the testator that the grant of the option was an improvident act, then he during his lifetime had, and his personal representatives after his death have (subject to any limitation period) a cause of action against them. (If the personal representatives are unwilling to institute proceedings against the defendants, the plaintiff, as a beneficiary under the will has his remedy). If the plaintiff has also a cause of action in tort, then the defendants are at risk of having to pay damages twice over, since any damages awarded to the estate would not enure to the benefit of the plaintiff as a specific devisee, unless he were also the general residual beneficiary …
[6](1983) NZLR 37.
The defendants submit that there is no basis upon which it can be contended that STL owed a duty of care to anyone other than Jean when it settled the County Court proceeding. It is submitted that STL did not owe a duty to someone who, on Jean’s death, might conceivably claim provision out of her estate pursuant to Part IV of the Administration and Probate Act 1958 (Vic).
Relying on the decision of Dawson J in Van Erp, the defendants submit that while a solicitor may owe a duty to a nominated beneficiary to give effect to testamentary instructions in favour of the nominated beneficiary, no duty was owed by a solicitor to a prospective beneficiary under a client’s will in relation to a proposed dealing with the property during the client’s lifetime. Citing Clarke v Bruce Lance & Co, this is so because the proposed dealing, unlike the testamentary instructions, does not have as its object the benefit of the plaintiff.
To conclude that STL owed a duty of care to the plaintiff, would raise the possibility of double recovery, by the estate and by the plaintiff in her own right. The question of double recovery was one of the matters raised in Clarke v Bruce Lance & Co at 370. This is in contrast to Van Erp where only the disappointed beneficiary could recover substantive damages.
STL also note that in Van Erp’s case the High Court emphasised that the solicitor in that case would not be exposed to any conflict of interest were it held that she owed duties to both the intended beneficiary and the deceased. The relevant transaction had as its object the benefit of the nominated beneficiary.[7] In this case, STL submits that the position would be different. That is, if, in settling Jean’s claim, STL owed a duty of care not only to Jean but to any third person likely to be interested in making a claim against her estate on her death, it may have put STL in an “intolerable position”. That is, an administrator such as STL would need to consider not just the interests of the represented person but may also be required to consider the maximisation of the estate for persons such as the plaintiff who might claim interest in the represented person’s estate on her death.
[7]Hill v Van Erp (1997) 198 CLR 159 at 167 per Brennan CJ, at 187 per Dawson J, at 196-197 per Gaudron J, at 236 per Gummow J.
STL also submits that in the present case to impose such a duty on it and if it were upheld, would place STL in a position where a duty of care may be owed to everyone to whom the testator may have had responsibility to make provision on death pursuant to Part IV of the Administration and Probate Act 1958 (Vic).
Finally, STL submits that in the circumstances of this case, if there had been any wrongdoing on STL’s part the estate had a remedy. That is, the estate could always sue STL as an administrator. However, in this case the plaintiff cannot and does not make a claim on behalf of the estate.
Plaintiff’s submissions
The plaintiff submits that whether a duty of care exists in a particular case must depend upon all the circumstances of that case and in particular on all of the features of the relationship between the plaintiff and the defendant.
The plaintiff submits that such a case should not be determined until all the evidence is heard and that a summary dismissal of the plaintiff’s case in such circumstances is inappropriate.
It is submitted that whether a duty of care is owed is an issue of law and is one which is appropriate for determination by the trial judge.
The plaintiff’s submissions considered the principles underlying when a duty of care is owed, including the concepts of reasonably foreseeability, proximity, reliance and assumption of responsibility.
The plaintiff contends that there are instances where the Court has imposed a duty where the defendant has had a contractual or like obligation to one person and because of a failure to exercise reasonable care in the performance of that duty loss is caused to a third party and, therefore, a duty of care to that third party has been found to exist. The plaintiff submits that the present case is analogous to those types of cases where duty has been held to exist and as such, the duty of the plaintiff here is likely to be imposed on the defendant pursuant to “the incremental approach”.
Finally, the plaintiff submits that if such a duty of care were not imposed, STL would be permitted to escape responsibility to compensate a person who suffers a loss due to their negligence by the “erection of an arbitrary and artificial barrier” to the plaintiff’s claim.
Duty of care authority – generally and pure economic loss
A duty of care is a legal obligation to avoid causing harm and arises where harm is “reasonably foreseeable” if care is not taken. Historically, the case law in relation to the common law duty of care can be traced back to Donohue v Stevenson.[8] The idea of reasonable foreseeability of risk was at the heart of Lord Atkins’ general test for the existence of a duty of care.
[8][1932] AC 562.
The recovery of damages for purely economic loss caused by negligence first came about following the decisions in Hedley Byrne & Co Ltd v Heller & Partners Ltd,[9] a case which was concerned with pure economic losses for negligent misstatements and Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad”[10] (“Caltex”) which was concerned with purely economic losses caused by negligent acts, or in situations other than cases of negligent misstatement. Caltex also emphasises the requirement that a specific individual, distinct from a general class of persons, will suffer financial loss as a result of the defendant’s actions.[11] In Perre v Apand Pty Ltd[12] it was held that damages for economic loss can be awarded, even if there is no relationship between the plaintiff who has suffered economic loss and the person who has suffered physical damage caused by the defendant. It extends liability for pure economic loss suffered by third parties in some circumstances.
[9][1964] AC 465.
[10](1976) 136 CLR 529.
[11]Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 per Mason J at 593.
[12](1999) 198 CLR 180.
Perhaps the most useful and applicable case in the present situation is Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (“Johnson Tiles”).[13] It provides a lengthy but clear and concise summary of the development of the law in relation to the recovery of damages for purely economic loss caused by negligence and sets out what could be regarded as the test for determining the existence of a duty of care in pure economic loss cases with novel facts. It follows the decisions of Perre v Apand Pty Ltd (supra); Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad” (supra); Donohue v Stevenson (supra) and considered the decision in Hill v Van Erp (supra).
[13][2003] VSC 27.
In Johnson Tiles, the defendant produced and supplied gas to a privatised government body who on-sold it to retailers, who further on-sold it to the plaintiff. Due to the defendant’s negligence, the supply of gas was interrupted for one week in 1998. The interruption caused economic loss to the plaintiff. The subsequent judgment sets out the three limbed test for determining whether there was a duty of care owed in economic loss cases. The relevant factors to consider are:
1.determining whether the loss was reasonably foreseeable;
2.determining whether there was a relationship of proximity;[14]
3.identifying and considering relevant salient features for and against the imposition of a duty of care.
[14]Although there has been somewhat of a “rise and fall” with the doctrine of proximity in duty of care cases, it appears to still be a relevant consideration in duty of care matters involving purely economic loss.
In finding that the law of torts should not intrude into the area of pure economic loss in the circumstances of the case, (however finding Esso owed a duty of care to the business users to avoid causing them property damage) Gillard J in summary held:
1.The proper approach to determining whether a duty of care exists to avoid purely economic loss in cases that give rise to a novel factual situation is first, to determine whether the loss was reasonably foreseeable, secondly, to determine whether there is a relationship of proximity between those suffering loss and those who allegedly cause the loss and finally, to identify and then consider competing salient features for and against imposition of a duty of care.
2.Justice Kirby adopted this test in the judgment of Perre v Apand Pty Ltd[15] and Callanan J’s focus on the weighing of the various salient features in the same case was recently supported in Sullivan v Moody[16].
3.Proximity is to be understood in terms of the test as originally enunciated by Lord Atkin in Donohue v Stevenson,[17] that is, divorced from policy considerations.
4.It is to be noted that the concept of proximity is of little practical guidance in determining whether a duty of care exists in cases, such as the present, that do not give rise to facts analogous to cases in which a duty has been established.
5.In novel cases the weighing of the salient features will be the predominant indicator of whether or not to impose a duty of care and this process is to be understood of the weighing of competing policy considerations relevant to the imposition of a legal duty in the particular case.
6.A duty of care will not be established based on a finding of reasonable foreseeability and proximity where the salient features, after proper consideration, do not weigh in favour of the imposition of a duty of care.
7.To establish what the salient features are that need to be considered, recourse is to be had to principles that have been established in like cases adhering to the concept of developing this area of law both incrementally and very cautiously.
8.It is important to know that the law is biased against finding duty of care in cases of purely economic loss.
9.Accordingly, the salient features to assess in the present case were reliance and the undertaking of responsibility, the regime of contracts between the various parties, the statutory regime regulating supply of gas services, principles of indeterminacy of liability, community standards, the concept of vulnerability and what effects the imposition of a duty of care would have on the commercial interests of the tortfeasor[18].
[15](1999) 198 CLF 180.
[16](2001) 207 CLR 562.
[17][1932] AC 562.
[18]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] ATR 81-692; [2003] VSC 27 per Gillard J at [672]-[757], [775]-[1113], [1163]-[1189], [1340]-[1346] but specifically [672]-[757].
Does STL owe Ms Abel a duty of care?
The duty of care test firstly requires an analysis of whether it was reasonably foreseeable to someone standing in the shoes of STL at the relevant time, being the time the County Court proceedings were settled on 8 February 2009 that the plaintiff would suffer the loss she claims to have suffered, namely economic loss as a beneficiary of Jean’s estate?
The plaintiff submits[19] that STL accepted the role as an administrator of Jean’s estate and duties associated with it. They further argue that a failure to carry out the duty with reasonable care so that the estate incurs a loss, and subsequently those entitled to the estate on the person’s death pursuant to the will or laws of probate, was inevitably foreseeable.
[19]Outline or argument, paragraphs 10-14.
The test is of reasonable foreseeability, not inevitable foreseeability, but little turns on this.
Whether the alleged loss was reasonably foreseeable is a question of law.[20]
[20]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] ATR 81-692; [2003] VSC 27 at [796].
Arguably, it is reasonably foreseeable that if STL failed to carry out their duty as administrator with reasonable care as alleged, then Jean’s estate would suffer loss. However, STL had to balance the interests of the estate settling the proceedings early and the benefit to Jean of having the settlement proceeds available for her care viz a viz the estate being involved in protracted litigation where the estate would incur costs and Jean would not have the benefit of any proceeds until a later time.
In relation to the argument that it was reasonably foreseeable that those entitled to the estate under the will would suffer loss, STL as an administrator does have the power to open a will under s 58G of the Guardianship and Administration Act 1986 (Vic). The relevant section of the Act is s 58 and provides:
58GPower to open will
An administrator may, either before or after the death of a represented person, open and read without order any paper or writing deposited with the administrator and purporting or alleged to be the will of the represented person.
However, at the relevant time the plaintiff was not a beneficiary under Jean’s will and at the relevant time, Jean was alive. While the plaintiff may have been able to argue under the laws of probate that she had a beneficial entitlement in Jean’s estate or may have been a member of a class of persons who may have taken a beneficial entitlement on Jean’s death, there was no entitlement at the relevant time. If the plaintiff had predeceased Jean, there would never be any entitlement. It is hard to imagine how it was reasonably foreseeable that at the time the County Court proceeding was settled that anyone beyond Jean would have suffered loss or that STL should have anyone beyond Jean in their contemplation as likely to suffer loss. This point ties into the issue of indeterminacy.
Secondly, was the relationship between the plaintiff and STL sufficiently proximate – was she a “first line” victim? The plaintiff argues that the beneficiaries of Jean’s estate were in a relationship of proximity to STL.[21] STL acted for Jean and Jean’s estate. This was the intent of their appointment. STL was not acting for the plaintiff or any potential beneficiary of Jean’s estate upon her death. The plaintiff is one step removed from Jean. Her alleged loss comes about because her mother Jean, being a person whose affairs were being managed by STL, was deprived of the financial gain she and her estate may have received, if STL had pursued the County Court proceedings as opposed to settling them early. Applying the proximity test, the plaintiff was not a first line victim, rather she is the third person who secondarily claims a loss of livelihood, support or expected benefits from her association with Jean. The courts have an aversion to compensating for pure economic loss those who are once removed from the direct victim of the negligent conduct.[22] This also assumes that STL’s conduct was negligent.
[21]Outline of argument, paragraphs 15 to 18.
[22]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] ATR 81-692; [2003] VSC 27 at [848].
Thirdly, what are the competing social or policy considerations for and against the imposition of the duty of care. Are there any social policy considerations for indeterminate liability of STL to an indeterminate class, breach of STL’s statutory duties as administrators to act in Jean’s best interest if a duty was owed to the plaintiff?
If STL was held to owe a duty of care to the plaintiff then it follows they would then owe a duty of care to an arguably indeterminate class of potential beneficiaries of Jean’s estate based on the laws of probate in the State of Victoria. Under the laws of probate, the class of persons who could make a claim on the estate of a deceased person is very wide.
Further, as Jean was alive at the relevant time when the County Court proceeding was settled, the class cannot be clearly defined. For example, the plaintiff or any other potential beneficiary may have predeceased Jean and on that basis would not have had any beneficial interest in Jean’s estate upon her death. Then how could the law allow a person who may never realise any benefit to make a claim against STL on the basis that they had incurred a loss? Indeterminancy is a relevant consideration for refusing to recognise a duty of care is to be determined immediately prior to the negligent act.[23]
[23]Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27.
Presently, the issue before the Court, is whether the matter should be summarily dismissed on the basis that Van Erp stands for the principle, as alleged by the defendant, in that no duty of care was owed to the plaintiff.
Principles applying to summary judgment
The defendant seeks summary judgment against the plaintiff pursuant to s 63 of the CPA and r 23.01(1) of the Supreme Court (General Civil Procedure) Rules 2005.
The CPA commenced on 1 January 2011 and aimed to substantially reform the way litigation is conducted in the State of Victoria. One of the key reforms of the CPA was the liberalisation for the test for summary judgment, empowering courts to dispose of unmeritorious claims or defences summarily. Sections 63 and 64 of the CPA provide:
63.Summary judgment if no real prospect of success
1.Subject to s 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.
2.A court may give summary judgment in any civil proceeding under sub-s (1) –
(a)on the application of a plaintiff in a civil proceeding;
(b)on the application of a defendant in a civil proceeding;
(c)on the court’s own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.
64.The Court may allow a matter to proceed to trial
The court may allow a matter to proceed to trial despite anything to the contrary in this Part or any Rules of Court, a court may order that a civil proceeding proceeded to trial if the Court is satisfied that, despite there being no real prospect of success the civil proceeding should not be dismissed of summarily because –
(a)it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing of the merits is appropriate.
The Court of Appeal in Manderson M & F Consulting (A Firm) v Incitec Pivot Limited[24] said:
In JBS Southern Aust Pty Ltd v Westcity Group Holdings Pty Ltd[25] Croft J had occasion to consider on appeal from an Associate Judge, a contention that a decision granting summary judgment in relation to some claims under s 63 was erroneous. His Honour undertook a helpful review of the background to the legislation and one recently decided in this Court.
The authorities reviewed by Croft J in JBS Southern Aust v Westcity Group Holdings, which disclose the underlying rationale of s 63 of the Act, make it clear that an inquiry as to whether a case has “no real prospects of success” involves considerations extending beyond an analysis of the sufficiency of the statement of claim to plead a cause of action. The new power under s 63 is not one to be exercised by reference only to the sufficiency of the pleading. For as Croft J said in JBS Southern Aust v Westcity Group Holdings:
Even if the Court had doubts as to the prospect of success of a defendant’s claim … in terms of the s 63 test, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims.
[24][2011] VSCA 444 [31].
[25][2011] VSC 746.
In Manderson’s case, the Court of Appeal discussed the common law tests that were applied before the CPA. However, the Court of Appeal did not suggest that in creating the new test in s 63, Parliament was not seeking to liberalise the common law test that had previously applied. This much can be seen by the Court of Appeal’s approval of Croft J’s decision in JBS Southern Aust Pty Ltd & Anor v West City Group Holdings Pty Ltd & ors.[26] The “no prospect of success” test is less stringent than the “old” test that the claim is hopeless, untenable or bound to fail.[27]
[26][2011] VSC 476, [34]-[54].
[27]Spencer v Commonwealth [2010] 241 CCLR 11 [24] (French CJ and Gummow J).
In summary, in JBS Southern Aust Pty Ltd at paragraphs 36 to 54, Croft J identified the following principles as applicable to a summary judgment application pursuant to the CPA:[28]
1.If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed. In other words, the claim which ought to be dismissed under the old test will be dismissed under the new test;
2.A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic; the new test does not direct enquiry as to whether a certain and concluded determination could be made that the proceeding, or a claim, would necessarily fail. What is required is a practical judgment by the Court as to whether a claim has been more than are “fanciful” prospect of success;
3.The less complex issue in a case then the easier it is for a court to take the view that such proceeding is capable of being determined in summary judgment; and
4.Whatever the test to be applied, the power to order summary dismissal of the claim must be exercised with care. This is particularly so where the case may involve issues of contested, or where its consequences may affect a large number of persons, or the construction of complex documents.
[28]JBS Southern Aust Pty Ltd and anor v Westcity Group Holdings Pty Ltd and ors [2011] VSC 476 per Croft J at [50] citing Matthews SPI Electricity Pty Ltd [2011] VSC 168 at 22 and Ottedin Investments Pty Ltd v Portbury Development Co Pty Ltd [2011] VSC 222, [18].
An application under r 23.01(a), that the pleading does not disclose the cause of action, is identical to the power under the Court’s inherent jurisdiction to enter judgment in unsustainable cases. The applicant must show that the pleading is defective in substance and not merely that the claim is defectively stated. The allegations of fact in pleadings are assumed to be true for the purpose of the argument only. The Court is then invited to strike out the claim of the defence on the ground it is bound to fail even if the allegations are proved.[29]
[29]Matthews v SPI Electricity Pty Ltd (Ruling No 2) [2011] VSC 168.
The test adopted in the CPA for summary judgment is based in part, upon and is similar to the test adopted in the Federal Court.[30] The operations of the provisions of s 31A of the Federal Court of Australia Act 1976 (Cth) were considered by the High Court in Spencer v Commonwealth of Australia[31]. French CJ and Gummow J reaffirmed at [24] the position which the High Court had emphasised in Fancourt v Mercantile Credit:[32]
[30]JB Southern Aust Pty Ltd and anor v West City Group Holdings Pty Ltd and ors [2011] VSC 476 at [41].
[31][2010] HCA 28; (2010) 241 CLR 118.
[32](1987) 154 CLR 87 at 99.
[24]The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or the basis that the action is frivolous, a vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credit Ltd said:
“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.”
More recently in Batistatos v Roads and Traffic Authority (New South Wales) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated the statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following:
“ordinarily, a party is not to be denied the opportunity to place his or her case before the Court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.
There would seem to be little distinction between those approaches and the requirement of a “real” as distinct from “fanciful” prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in the pre‑existing Rules of Court authorising summary disposition.”
[25]Section 31A(2) requires a practical judgment by the Federal Court as to whether the application has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the appellant is unlikely to succeed on the factual issues. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
[26]Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact or mixed law and fact. (footnotes omitted, emphasis added.)
Summary dismissal and duty of care
Farrow Finance Co Ltd (in liq) v Day Neilson Jenkins & Johns[33] was a case analogous to the current matter on the basis that it was a duty of care matter where the plaintiff was seeking damages for pure economic loss. The defendant sought summary dismissal of the plaintiff’s case stating that no relevant cause of action was identified. As the categories of case are not closed, the summary dismissal application was refused. In coming to his conclusion on summary dismissal and the question in relation to a duty of care, Hansen J referred to the case of Wickstead v Browne[34] and made the following comments:[35]
In Wickstead the Court of Appeal of New South Wales considered an appeal from an order for summary dismissal of a plaintiff’s claim on the basis that it disclosed no reasonable cause of action against the defendant. The appeal was allowed in part, there being a difference in approach between Kirby, P. on the one hand and the other members of the Court, Handley and Cripps, JJA on the other. Their Honours differed in relation to the cause of action pleaded in negligence based upon a common law duty of care. Handley and Cripps, JJA were of the view that the cause of action could not succeed and, accordingly while the appeal was allowed in part, it was not allowed in relation to that cause of action. Kirby, P acknowledged the force of the considerations expressed by the majority but concluded that for a number of reasons that part of the case should not be excised from the proceeding at that stage. Those reasons included the marginal benefit to the defendant of preventing the case from proceeding on that ground, the considerable changes which the law of negligence had undergone in recent years, the claim could not then be said to be “hopeless” or “manifestly groundless”, and the further consideration that at (5-6) –
(2)Common experiences teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and suggested action can be judged with a full understanding of all the relevant evidence. Testimony gives colour and content to the application and development of legal principle. That is why leave is usually required to an appeal from interlocutory orders. Appellate courts, including this Court, will usually require evidence to be adduced and trial concluded before considering the application of the law to that evidence. Out of the detail of the evidence ultimately proved, affecting the relationship of the respondent and the appellant, may arise a finding of a duty of care which the common law of negligence would uphold.
[33](Unreported) Supreme Court of Victoria (8 March 1995) per Hansen J, BC 9503226.
[34](1992) 30 NSWLR 1 per Kirby, Handley and Kripps JJ.
[35](Unreported) Supreme Court of Victoria (8 March 1995) per HansenJ BC950326 at 6.
The plaintiff applied to the High Court for special leave to appeal against the decision of the majority on the negligence aspect. The application was granted, the appeal was then and there allowed, and orders were made which retained the negligence claim in the proceeding. That left the plaintiff in the position of being able to argue that there was a cause of action in negligence. In speaking for the Court, Deane J said (at 18 of the Transcript):
As we have indicated, we have come to a clear conclusion that in all the circumstances of this case, including the circumstance that the action against the respondent will be proceeding to trial on other counts in any event, the claim in negligence should not have been struck out.
We note that we are in general agreement with the reasons given by Justice Kirby in the Court of Appeal for that conclusion and that we do not dissent from his Honour’s acknowledgement of: ‘the force of the considerations which Handley and Cripps, JJA have collected to demonstrate that the [appellant’s] cause of action in negligence faced serious difficulties, and accordingly, may fail.
In a decision given in the Meadow Gem proceeding on 25 August 1993, Hedigan J who until recently was a judge managing these four proceedings, referred with approval to the observations or Kirby, P. So, also, do I and take the same approach in the resolution of this application.
It is important to note that their Honours comments in Wickstead v Browne that “the circumstance of the action against the respondent will be proceeding to trial on other counts in any event” was part of the reason that the negligence claim was reinstated. It should also be noted that in this matter and the decision in Wickstead v Browne to which it refers were decided in 1995 prior to the decisions in Johnson Tiles and Hill v Van Erp and therefore, the principles in relation to when a duty of care will be owed in a pure economic loss case are somewhat clearer than at that time.
In New South Wales v West[36] it was held that a common law duty of care, or breach of it, could not be ruled out before explanation of the facts in a trial. The case concerned a duty of care owed by a statutory authority. Their Honours made their finding on the basis that the current Australian position on the duty of care owed by statutory authorities in general, and fire authorities in particular, was not straightforward.
[36][2008] 2 ACTLR 255 per Higgins, Penfold and Graham JJ.
This is useful in the current case in the sense that it supports a notion that novel duty of care cases should not be summarily dismissed. However, it relates to a breach of duty by statutory authority where the plaintiff has suffered loss occasioned by property damage.
It appears that the authorities tend not to favour granting applications for summary dismissal in novel duty of care cases, however in allowing the cause of action to be argued, it was sometimes on the basis that the matter would proceed to trial to determine other issues in any event. Further, the approach of the Court in deciding summary dismissal applications, has been to briefly consider the duty of care authorities to form the decision as to whether a matter should be summarily dismissed.[37]
[37]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] ATR 81-692; [2003] VSC 27 at [775].
It is argued by STL, in paragraph 8 of their written submissions, that on the basis of Dawson J’s comments at 187, with whose reasons Toohey J agreed, where his Honour cited Clarke v Bruce Lance and Co as authority for the proposition that no duty was owed by a solicitor to a prospective beneficiary under a client’s will in relation to a proposed dealing with property during a client’s lifetime, that STL does not owe a duty of care to the plaintiff. This is because the transaction in which the defendants were retained by the testator did not have in its object the benefit of the plaintiff. In this matter, the transaction, namely the County Court proceedings in which STL were acting for Jean, it is argued do not have as their object the benefit of the plaintiff. As the Court in Clarke v Bruce Lance & Co goes on to explain, at the relevant time, the interests of the plaintiff and the testator did not match “hand in hand” and created a conflict of interest for the solicitors. If they did owe a duty of care to the plaintiff, it would have put them in an intolerable situation.
In the current matter, at the relevant time, the interests of the plaintiff and Jean did not match “hand in hand”. The interests of the plaintiff were to maximise any benefit she may receive from Jean’s estate upon Jean’s death (despite her not being named a beneficiary in the will at the relevant time). Jean’s interests were for the County Court proceedings to be settled expeditiously so the settlement monies could form part of her estate and be used for her benefit while she was still alive. They are different considerations. As in Clarke v Bruce Lance & Co, if STL owed a duty of care to the plaintiff or any other potential beneficiary, the category of which is quite wide due to the probate law in the State of Victoria, it would have placed them in an intolerable situation as the interests of the plaintiff and any other potential beneficiary, and Jean were in conflict.[38] It was arguably not possible for STL to maximise the benefit for potential beneficiaries while bringing the County Court proceedings to an end expeditiously so the settlement monies could be used for Jean’s benefit in her lifetime. Moreover, their statutory role does not require that they do so.[39]
[38]Paragraph 10 of STL’s written submissions.
[39]See s 49(1) Guardianship and Administration Act 1986 (Vic) in Divisions 3 and 3A of the Guardianship and Administration Act 1986 (Vic), generally.
Further, in Clarke v Bruce Lance & Co, their Honours also said at 889:
So if the defendants owed a duty to anyone other than their client, the testator, it must have been to the whole of this indeterminate class of potential donees or beneficiaries.
Principals of indeterminancy or liability are salient features that the Court must consider in a matter which concerns a duty of care to avoid purely economic loss.[40] Therefore, that is a relevant consideration in the present matter. If STL was held to owe a duty of care to the plaintiff then it follows they would then owe a duty of care to an arguably indeterminate class of potential beneficiaries of Jean’s estate. On the basis of the authorities, this would be a factor against the imposition of a duty of care. On that basis and for the reasons stated above, I consider the plaintiff’s claim that STL owed her a duty of care as a potential beneficiary has no reasonable prospect of success.
[40]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] ATR 81-692; [2003] VSC 27.
Conclusion
There must be, even in tort law, some reasonable limit to the duty of care. The problem is where to set that limit. I consider this is one such case. The law has been reluctant to recognise a duty of care to avoid loss which is purely economic loss.[41] The question of when a duty will be imposed in a novel or difficult case remains problematic with no universal test being recognised by the High Court and continuing on an incremental approach.
[41]New South Wales v West [2008] 2 ACTLR 255.
While the current Australian position on the duty of care owed in cases of purely economic loss is not settled and still developing incrementally, Hill v Van Erp and Clarke v Bruce Lance & Co while different factual situations to the present case, support STL’s argument that they would not owe a duty of care to the plaintiff. Success of the plaintiff’s case is critically dependent upon a position of law which would contradict the binding decision of the High Court in Van Erp’s case. Further, the law is biased against finding a duty of care in cases of purely economic loss. Accordingly, it would not be in the interests of justice that the Court and the parties be put to the expense and delay of a trial to decide the issues.
Indeterminate liability is an issue in the current matter and accordingly, even if the plaintiff could prove foreseeability and proximity, the claim must pass the hurdle of proving that STL’s duty would not be indeterminate in amount, time and class.[42] Indeterminate class appears to be an issue, particularly in light of their Honours’ comments in Clarke v Bruce & Co.[43] I consider that the plaintiff does not have any real prospect of success in establishing that STL owed her a duty of care. For the reasons set out I do not consider that it is in the interests of justice or that this is a dispute of such a nature that only a full hearing on the merits is appropriate as required under s 64 of the CPA.
[42]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] ATR 81-692; [2003] VSC 27 at [740].
[43][1988] 1 All ER 364; [1988] 1 WLR 881.
Accordingly, the plaintiff’s claim should be summarily dismissed.
In the circumstances, subject to any submissions the parties may have, I consider an appropriate costs order is that the plaintiff pay the defendant’s costs of the proceeding.
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