Baiyai Pty Limited v Daniel Pogson
[2007] NSWDC 167
•8 August 2007
CITATION: Baiyai Pty Limited v Daniel Pogson [2007] NSWDC 167 HEARING DATE(S): 19/3/07 - 22/3/07, 26/3/07, 27/3/07, 29/3/07
JUDGMENT DATE:
8 August 2007JURISDICTION: Civil JUDGMENT OF: Rolfe DCJ DECISION: 1 Judgment in favour of the First Plaintiff against the Third Defendant in the amount of $147,444 ; 2 Judgment in favour of the Second Plaintiff against the Third Defendant in the amount of $1. CATCHWORDS: Professional negligence action against solicitor - Matters arising out of solicitor acting for both Vendor and Purchaser in property conveyancing transaction - Failure to properly warn plaintiff of associated dangers - Failure to ensure plaintiff was fully apprised of terms of contract before entering into it - Failing to ensure, before contracts were exchanged, that plaintiff was in a position to discharge mortgage on settlement - Failure to explain loan agreement - Obligation to ensure plaintiff was protected at settlement when title deeds were handed over and balance of purchase price was outstanding - Causation - Duty to mitigate - Consideration of valuation evidence CASES CITED: Heydon v NRMA Limited (2000) 51 NSWLR 1
Rogers v Whitaker (1992) 175 CLR 479
Hawkins v Clayton (1988) 164 CLR 539
Beach Petroleum NL v Kennedy (1999) 48 NSW LR 1
Clark Boyce v Mouat (1994) 1 AC 428
Citicorp Australia Limited v O'Brien (1996) 40 NSWLR 398PARTIES: Baiyai Pty Limited (1st Plaintiff)
Lyndell Joy Humphrey (2nd Plaintiff)
Daniel Pogson (1st Defendant)
Rosalie Pogson (2nd Defendant)
Gregory Guy (3rd Defendant)FILE NUMBER(S): 2004/05 COUNSEL: M A Bradford (1st & 2nd Plaintiffs)
C D Freeman (1st & 2nd Defendants)
J Oakley (3rd Defendant)
JUDGMENT
1 In 1996 the First Plaintiff (the “Company”) purchased the property known as “The Angle” comprising 215 acres adjacent to the Macquarie River, some few kilometres from Dubbo. “The Angle” consisted of 11 separate titles and the purchase price was $720,000. The whole of the purchase price was borrowed by the Company to acquire the “The Angle”, including some funds provided by the Second Plaintiff, Lyndell Joy Humphrey (Ms Humphrey), a director and owner of the whole of the issued share capital of the Company since its incorporation.
2 Between 1996 and 1998 the Company sold certain portions of the “The Angle”. The portions that were sold were known as “The House Block” and “The Small Block”.
3 On 3 December 1998 the Company entered into a contract to sell the remaining portion of “The Angle”, known as “The River Flats” (the “Property”) to the First and Second Defendants, Daniel Benjamin Pogson and Rosalie Rae Pogson (together, the “Pogsons”).
4 The Pogsons instructed the Third Defendant, Gregory Guy (“Mr Guy”), a solicitor, to act for them on the purchase.
5 Ms Humphrey instructed Mr Guy to act for the Company on the sale.
6 On or about 14 January 1999 Ms Humphrey entered into an arrangement with Mr Pogson, under which she agreed to borrow from him $50,000 to enable the Company to discharge the existing mortgage on the Property. I will refer to this arrangement as the “Loan Agreement”.
7 On or about 15 January 1999 the Company transferred the Property to the Pogsons. Sufficient funds were received to discharge the mortgage on the Property but the Pogsons did not pay the Company the balance of the purchase price.
8 As a result of the Pogsons’ failure to pay the balance of the purchase price, the Plaintiffs commenced proceedings in this Court claiming damages against the Defendants for the difference between the market value of the Property as at 15 January 1999 and the amount of $50,000 received by Ms Humphrey under the Loan Agreement which she used to discharge the mortgage given by the Company over the Property.
9 The proceedings between the Company and Ms Humphrey on the one hand and the Pogsons on the other, were settled on the second day of the hearing of these proceedings on 20 March 2007. What remains for determination, therefore, are the Plaintiffs’ claims against Mr Guy.
Pleadings
10 The Plaintiffs proceeded against Mr Guy on their Amended Statement of Claim filed on 17 July 2006 (the “ASOC”).
11 Mr Guy’s Amended Defence to the ASOC was filed in Court on 22 March 2007.
Submissions
12 Mr M A Bradford of counsel appeared for the Plaintiffs. His undated written submissions were handed up in Court on 29 March 2007 and supplementary submissions were provided on 13 April 2007.
13 Ms J Oakley of counsel appeared for Mr Guy. Her written submissions are dated 29 March 2007. Supplementary written submissions of Mr Guy dated 17 April 2007 were provided by Ms Oakley’s instructing solicitors.
Issues for Determination
14 Although both the ASOC and the Plaintiffs’ Revised Statement of Issues set out numerous allegations made on behalf of the Plaintiffs against the Third Defendant, at the end of the day, the issues for determination by the Court can be distilled from the written submissions of both counsel which I have identified in paragraphs 12 and 13. Those issues are set out later in this judgment under the following topic headings:
A Mr Guy’s Retainer
B Matters Arising out of Mr Guy accepting a retainer to act for both the Company and the Pogsons
C What advice was given concerning the Contract and did Mr Guy fail to exercise reasonable care and skill in giving the advice
D The Loan Agreement and Settlement
E Instructions not to Exchange Contracts
F Trade Dollars
G Causation
H Contributory Negligence
I Damages
J Failure to Mitigate
K Interest
L Ms Humphrey
N OutcomeM Costs
Evidence of Ms Humphrey
15 The affidavits relied on by the Plaintiffs are all contained in exhibit A.
16 In her affidavit sworn 20 December 2005, Ms Humphrey gave evidence that she is 44 years of age, having completed her high school education at year 12 at MLC Burwood. Ms Humphrey then studied at the University of New South Wales for four years and graduated with a Bachelor of Science Education Degree. She taught for about a year before returning to study medicine, but left that course after two and half years.
17 Ms Humphrey lived in Sydney and Newcastle between 1987 and 1994. She moved to Dubbo in 1994 to be near her sister who lived on a farm at Geurie. Then, in 1999, Ms Humphrey moved to Narromine.
18 Since obtaining her university degree, Ms Humphrey has worked on a casual basis as a teacher. She has suffered a depressive illness and at the time she made her affidavit Ms Humphrey was in receipt of a disability pension. Ms Humphrey is not married.
19 Ms Humphrey has had quite a few dealings in buying and selling real estate. She has been doing this since 1992 in order to generate income for herself. In this respect, in my assessment, Ms Humphrey has not been particularly successful.
20 In 1992 Ms Humphrey bought land in Newcastle and developed it by building two duplex units. At the same time, Ms Humphrey bought a house in Newcastle, subdivided the land on which it stood and sold the block at the rear of the property.
21 In 1995 Ms Humphrey purchased an investment property at 20 Algona Street Dubbo. She did so by borrowing most of the purchase price.
22 In May 1995 Ms Humphrey purchased a further investment property being four flats at 30 Hunter Street Dubbo. Again, the purchase price was financed predominantly by a loan.
23 When Ms Humphrey purchased the property at 20 Algona Street Dubbo and the four flats at 30 Hunter Street Dubbo, Ms Joan Richardson, solicitor of Booth, Brown, Samuels & Olney (“BBS & O”) acted for her.
24 In 1996 Ms Humphrey incorporated the Company with the good intention of buying a farm property which could be used to provide work and other facilities for young aborigines living in and around Dubbo. In this respect, Ms Humphrey instructed Mr Geoff Osborne of Kerridge & Osborne Solicitors at Seaforth to advise and set up a unit trust structure to be used in the acquisition of a suitable property.
25 With this in mind, in 1996 Ms Humphrey arranged for the Company to purchase “The Angle”. Of the purchase price of $720,000, Ms Humphrey provided $270,000 to the Company made up of $145,000 of her own money and monies which she borrowed in the amount of $125,000 secured over the Hunter Street flats. The balance of the purchase price, $450,000, was borrowed by the Company through Peter Moraghan Financial Services of Dubbo. That mortgagee took a mortgage over “The Angle” as security. In addition, the Company obtained vendor finance in the order of $40,000 to cover stamp duty, legal costs and other out of pocket expenses. It appears this loan was discharged when the Company obtained a further $50,000 through Peter Moraghan Financial Services, which was advanced on a second mortgage over “The Angle”.
26 Although up to this point Ms Humphrey had been involved in a number of conveyancing transactions, my assessment of Ms Humphrey, after hearing her give her evidence in the witness box (and taking her evidence in chief into account as well), was that Ms Humphrey was and is a naïve person, especially in relation to commercial transactions. As I said earlier, Ms Humphrey has not been successful in that area. Ms Humphrey is a person of nervous disposition, she is not a clear thinker and is very unsure of herself. Because of these things, she was hesitant in the witness box. In my assessment Ms Humphrey is a person who is easily influenced. For example, Ms Humphrey gave evidence that her father talked her into accepting a transfer of some real estate when she was a very young woman in order to assist her father to minimise his taxation liability. Ms Humphrey agreed to do this although she felt burdened by the request. Similarly, I have no doubt that Ms Humphrey was easily persuaded by Mr Pogson in her dealings with him, she came under his influence and at times was scared of him.
27 Most importantly, I regard Ms Humphrey as a truthful, honest and reliable witness. Given the passage of time between the events in question and the date of the trial, I consider Ms Humphrey had a reasonable recall of most of the important events in question. As a whole I accept her evidence, except with regard to a small number of matters identified in the judgment.
28 In her evidence in chief, Ms Humphrey demonstrated her naivety in committing the Company to the acquisition of “The Angle” and the large borrowings. She said in paragraphs 27, 28 and 31 of her affidavit:
“ … I had not really properly thought through Baiyai’s purchase of “The Angle”. I had no plan in mind as to how Baiyai was going to make the repayments on its borrowings ...
I thought initially that Baiyai would be able to generate approximately $50,000.00 per annum of income by leasing out the water rights attached to “The Angle”. The water rights were leased out for one season, but the income generated by that was only $16,000.00. I hadn’t thought this through properly, and I didn’t get any advice in relation to it, and in hindsight I realise that I really had no idea what I was doing.
Only a couple of months after Baiyai acquired “The Angle”, Baiyai started getting late in making its mortgage payments to Peter Moraghan Financial Services. This triggered additional default interest rate payments and fees, pursuant to the terms of the mortgage. …”
29 In October 1997 the Company sold the water rights attaching to “The Angle” for $199,500, most of which was used to reduce the mortgage debt on the Property. Ms Humphrey’s ill considered approach to this transaction is set out in paragraph 32 of her affidavit:
“ … I did not seek or obtain any advice before agreeing to sell the water rights. I was originally intending to “act for myself” in relation to that transaction, but I did ultimately instruct (BBS & O) to act for me. By the time I approached (BBS & O) about this matter however, the deal with Mr Egan was practically done, and (BBS & O) were effectively engaged only to document and complete the transaction. …”
30 In December 1997 a further 14.67 hectares of “The Angle” was sold for $140,000, the bulk of which, again, was applied to reduce the mortgage debt.
31 In March 1998 what was left of “The Angle” was put to auction, but none of it was sold.
32 In May 1998 the house block of “The Angle” was sold and the proceeds applied in reduction of the mortgage debt.
33 Ms Humphrey said that shortly after acquiring the Hunter Street flats in 1995 she was looking to try and sell them, but had no success. As a result, in early 1998 she considered swapping the Hunter Street flats for another property and in this context spoke to Mr Pogson and Mr Paul Mahon. The upshot was Ms Humphrey agreed to swap the Hunter Street flats for vacant land at Coonabarabran owned by the Pogsons and Mr Murray Lapham. In this respect, although Ms Humphrey had previously instructed BBS & O on the sale of the Hunter Street flats and they had been involved in extensive negotiations with a potential purchaser, Ms Humphrey decided to instruct Mr Guy’s firm because Mr Guy had previously acted for Mr Pogson. With regard to Mr Guy, Ms Humphrey said (para 42 of her affidavit):
“I thought that it would be best to also use a solicitor who was familiar with trade dollars, and I thought that I would be able to save money on my legal costs by using the same solicitor as the Company.”
34 Ms Humphrey had also been trying to sell her investment property at 20 Algona Street Dubbo since June 1996 but had been unsuccessful. In June 1998 she agreed to sell this property to the Pogsons for $70,000, of which only $35,000 was payable in Australian dollar currency and the rest was payable in trade dollars.
35 The evidence establishes that “trade dollars” is a type of bartering tool used by persons or corporations for the acquisition or disposal of property. It either forms part or the whole of the purchase and/or sale price of the property purchased and/or sold. In order to “acquire” trade dollars it seems that it is necessary to join or use an organisation which puts sellers who are prepared to receive trade dollars in touch with purchasers who are able to provide trade dollars and vice versa. It would seem that these organisations can put a “trade dollar value” on an item of property or part thereof, or allow the party which owns the property to do so.
36 Ms Humphrey agreed in cross-examination that in late 1998 she was enthusiastic about trade dollars. In my assessment, such enthusiasm arose through Mr Pogson’s influence over Ms Humphrey. Mr Pogson spoke to Ms Humphrey about trade dollars (T 155.46). At T 170.21 – 171.17 Ms Humphrey’s evidence was:
“Q. It’s the case, isn’t it, that you made some inquiries about trade dollars from people other than Mr Pogson?
A. Yes.Q. You in fact opened a trade dollar account?
A. Which account?Q. Did you open a trade dollar account?
A. I opened a Tradewise account.Q. Tradewise was one of the organisations that enable people to have trade dollar accounts, do you agree?
A. Yes.Q. So it was some sort of exchange that people could use the facilities of Tradewise if they had trade dollars and they wanted to spend them on something that some other member of that particular organisation had?
A. Yes, (indistinct) had Tradewise dollars, yes.HIS HONOUR
Q. How did it work, can you explain it to me?
A. Yes, I’ll try, your Honour. Ordinarily a particular trade exchange would issue their own trade dollars and they weren’t very keen about taking other ones, trade dollars. For example – like Barter Card, for example would not accept Tradewise dollars. So it’s very hard to spend at any other exchange.Q. Just stopping you there. Barter Card, did that involve you paying them Australian dollars to receive a credit in the account for trade dollars, is that how they worked?
A. I’m not familiar with how Barter Card works because I’ve never been a member of Barter Card, but it’s just one of the more well known trade organisations.Q. What did you have to do when you established that account?Q. You established an account with Tradewise?
A. Yes.
A. Well, I was told I had to pay $500 to become a member, in Australian cash, I never did pay that. As to whether the Pogsons ever paid it on my behalf I’m not aware, but the trade dollar account was opened and I did receive monthly statements. At no stage did I ever receive any trade dollars directly into that account because I never received any trade dollars from the Pogsons, as you’re aware, and when I at a later stage purchased those trade dollars directly from Tradewise for cash, which is actually fairly unusual, those trade dollars went directly to the purchase of the units I was buying at Port Douglas not into my account.”
37 Ms Humphrey went on to say (T 171.46):
“Q. So the trade dollars comes to you through Tradewise, does it?
A. Yes, Tradewise controls the movement of trade dollars from one of their members to another and you have to pay Tradewise a commission, like 3 per cent of the transaction or whatever it may be in Australian cash dollars to move your trade dollars from your account to the other party’s account where you want to pay them to. That’s how Tradewise makes their money.”
38 Ms Humphrey said in para 110 of her affidavit that she opened her Tradewise account during 1998 and that she has had trade dollar accounts with E-Banc, A to Z Barter and Contrabart.
39 After the sale of the portion of “The Angle” known as the house block occurred in May 1998, there remained 52.826 hectares to be sold. This is the “Property” referred to in paragraph 3.
40 In August 1998 Douglas Mark Searle and his wife were interested in purchasing the Property for $165,000. There was discussion between Mr & Mrs Searle and Ms Humphrey about the purchasers paying a little bit extra for certain expenses incurred by the Company. The upshot was that the Company instructed its solicitors, BBS & O, to issue a contract to Mr & Mrs Searle for a purchase price of $165,000. Ultimately, after negotiations dragged on into September or October 1998, Mr & Mrs Searle decided not to proceed with the purchase because they did not want to pay for the extra expenses.
41 Around about this time Ms Humphrey became interested in purchasing some strata office units in Pitt Street Sydney. The owner was interested in selling the units to Ms Humphrey for $300,000 plus 300,000 trade dollars. In paragraph 56 of her affidavit Ms Humphrey said:
“I was intending to obtain 300,000 trade dollars on the sale of (the Property), and to finance the $300,000 Australian currency component of the Pitt Street office units purchase price by borrowings. Paul Mahon eventually offered me 300,000 trade dollars for (the Property). Dan Pogson matched that offer.”
42 Ms Humphrey’s evidence was that in early December 1998 she received a contract for sale of the strata office units in Pitt Street from the owner of those units. Ms Humphrey said she signed the contract and returned it to the owner.
43 In relation to the sale of the Property to the Pogsons, Ms Humphrey said that Mr Pogson inspected the Property on 3 September 1998 and she reached an agreement with Mr Pogson in October 1998 or thereabouts to sell the Property to the Pogsons for 300,000 trade dollars. At that time, Ms Humphrey said she had a conversation with Mr Pogson as follows (para 60 of her affidavit):
“I said ‘Will you be using Guy & Associates again?’
He said ‘Yes, why don’t you use them as well?’
He said ‘Yes, I will pay your legal costs if you also use Guy & Associates.’”I said ‘If I use Guy & Associates, will you pay my legal costs, because I won’t have any cash to pay my costs with.’
44 In paragraph 63 of her affidavit Ms Humphrey gave the following evidence:
“The agreement between (the Company) and Dan Pogson was subsequently varied, for reasons that I am not now able to recall, by reducing the price to 290,000 trade dollars.”
45 Shortly after Ms Humphrey’s conversation with Mr Pogson in October 1998, she said she spoke to Mr Guy about the matter and they had the following conversation (para 61 of her affidavit):
“I said ‘Hello Greg, my name is Lyndell Humphrey. I am selling a property to Dan Pogson. Can you act for me also in my sale to Dan, to save costs. Dan is going to cover my legal costs, as I am selling the property for Tradewise trade dollars, and I won’t receive any cash to pay legals.’
He said ‘Alright, I’ll look into that and get in touch.’”I said ‘I have been using (BBS & O) in Dubbo, who had prepared a Contract for a previous purchaser. You can probably get a copy of it from Joan Richardson in that Office, if we agree to pay their preparation costs.’
46 Ms Humphrey’s expectation was that, when Mr Guy accepted the Company’s retainer to act for it on the sale of the Property, that Mr Guy would provide nothing less than the full and usual service provided by a solicitor acting for a vendor in a conveyancing transaction, including taking her full and proper instructions and providing her with all the advice which was appropriate (second affidavit of Ms Humphrey, Exhibit A, p 183, para 5 (i).)
47 Ms Humphrey said in her second affidavit (para 5 (q), p 185) that if Mr Guy had explained to her, before she instructed him to act for the Company on the sale, what problems might arise as a consequence of him acting for both parties, then she would have instructed an independent solicitor to act for her especially because the transaction was unusual and the whole of the purchase price was payable in trade dollars. Ms Humphrey said that Mr Guy did not ever advise her prior to June 2000 that she should obtain independent legal advice in this respect. If Mr Guy had given Ms Humphrey such advice prior to the exchange of contracts on 3 December 1998, she said she would have definitely instructed another solicitor. I accept this evidence.
48 Although it was put to Ms Humphrey in cross-examination, in effect, that she absolutely would never have gone to an independent solicitor because she was saving money by having Mr Guy deal with the matter and having the Pogsons pay her costs, I accept Ms Humphrey’s rejection of this proposition. As Mr Humphrey made clear, if necessary, she would have been able to raise the funds to pay an independent solicitor by borrowing from her parents (T 355.22).
49 At the beginning of November 1998 Ms Humphrey told Ms Richardson of BBS & O that they were to no longer act for the Company in relation to the sale of the Property and that she was instructing Mr Guy to act for the Company. BBS & O then wrote to Mr Guy on 6 November 1998 informing him that Ms Humphrey had advised them that Mr Guy would be acting for the Company on the sale of the Property and that they had been asked to inform Mr Guy of their outstanding costs and disbursements.
50 Mr Guy’s letter of 9 November 1998 to BBS & O confirmed “we will be acting for Lyndell Humphrey in relation to (the sale of the Property) and would be pleased if you could forward contracts to our office. … we undertake to pay your costs of $520 from the proceeds of settlement.”
51 On 11 November 1998 BBS & O forwarded a copy of the contract for sale of the Property that they had prepared for the Company in relation to the proposed sale to Mr and Mrs Searle. A copy of that contract is found at pp 7A-7CB of exhibit 5.
52 Next, Ms Humphrey said she received from Mr Guy his letter dated 17 November 1998 which stated (exhibit 5, p 7):
“We refer to the above matter and enclose herewith front page of the contract.
Could you please arrange for the common seal of (the Company) to be affixed where indicated and return to our office as soon as possible.”
53 Mr Guy did not send to Ms Humphrey the remaining pages of the standard printed form of the Contract, nor the special conditions or any of the annexure documents, all of which formed part of the draft contract of the proposed sale to Mr and Mrs Searle.
54 Ms Humphrey gave the following evidence of what she then did (para 66 of her affidavit):
“I stamped the Common Seal of Baiyai Pty Limited on the front page of the Contract, as Vendor, and both myself and Kathy Barker (another Director of Baiyai) signed the document, and I forwarded the document via a friend to Dan Pogson to sign. I never at any time until well after 15 January 1999, saw or approved the remainder of the Contract for Sale, which I understand was ultimately exchanged on 3 December 1998. I had only seen the front page of the Contract at that time.”
55 In her original affidavit Ms Humphrey said that in late November 1998 she had a further telephone conversation with Mr Guy. Her evidence about the conversation was (para 67):
“Hello Greg, is the Contract with Dan Pogson for “The Angle” already exchanged?”
He said ‘No.’
He said ‘Ok, you let me know what you want to do.’”I said ‘Well, don’t exchange it then until I sort out a few things with Dan. He is putting a lot of pressure on me to settle it.’
56 The evidence establishes that contracts were exchanged between the Company and the Pogsons on 3 December 1998. The exchanged contract specified a completion date of 16 December 1998. Completion did not occur on that date.
57 On 18 December 1998 Mr Guy sent a letter to Ms Humphrey in the following terms:
Please do not date the document as it is dated on settlement.”“We refer to the above matter and as requested enclose herewith transfer document. We note that you will arrange for the Company seal to be annexed where indicated.
58 The evidence establishes that on 11 January 1999 Mr Pogson sent a fax to Mr Guy in the following terms:
“Hello Greg,
Best wishes for the New Year.
We are aiming for Wednesday 13th to settle ‘The Angle’, Dubbo with L. Humphrey.
My finance is with Peter Moraghan Moneylink, Dubbo 02 6884 3922. Amount of loan $110,000.
I need to get an advance against the loan from them for Stamp Duty.
An amount of $50,000 will go to Stacks – the law firm of Taree toward the $55,000 required to release the present mortgage on ‘The Angle’.
This is in fact a short-term loan from me to L. Humphrey, others involved probably don’t need to know that.
L. Humphrey will then release the titles to us without our paying the 285,000 trade dollars.
Other monies to be paid by me are:-I will release the 285,000 trade dollars to L. Humphrey simultaneous to her repaying the $50,000 to me.
1st Mortgage fees on loan
Commission Moneylink – 2%
L. Humphrey’s Dubbo Solicitor (approx. $500)
Council Rates from July 1st ‘98
Your costs incurred – L. Humphrey (on this job only)
Your costs incurred – D B & R R Pogson
$1000 cash remaining on the $5000 cash portion of contract (this can keep until L. Humphrey has repaid the $50,000 loan. Also then it can probably go to Dubbo City Council toward her unpaid rates on Hunter Street.)Lands office Dubbo approx. $200 crown road lease (?)
Could you please direct the balance of the Moneylink funds into the following account:
D B & R R Pogson No. 7 a/c
A/c no. 62 799 9639NAB Coonabarabran Branch 082 530
Thanks again Greg, I will try and ring you later today. I am under pressure to settle this as I have an O’draft commitment that was supposed to be paid out Dec. 30th and I have promised my bank Wednesday’s date .” (Emphasis added).
59 Ms Humphrey’s evidence in paragraph 81 of her affidavit was that, shortly after this, on or about 13 January 1999, she had a brief telephone discussion with Mr Guy, “about those proposed settlement arrangements”. Mr Guy told her that if she settled the matter on the basis of Mr Pogson’s proposal, she would have “no security” for the payment of the balance of the trade dollars purchase price. The conversation which Ms Humphrey said she had with Mr Guy is set out in para 81 of her affidavit as follows:
“I said ‘Dan appears to be desperate about this Contract, and I will try to help him if I can. Apparently he has already exchanged on some property in Sydney and is going to be sued if he can’t settle it in mid January at the latest.
I am buying some units in Sydney from the trade dollars that I will be receiving from Dan, but those Sydney units won’t be ready to settle until early February. I would prefer to settle my sale and the purchase simultaneously, but since Dan is in so much trouble, he has suggested that he loan me $50,000.00 to pay out my mortgage on “The Angle”, and I hand over the title deed to him so that he can borrow against it to settle his Sydney purchase. He will pay me my trade dollars when I can pay him back his $50,000.00, which he knows can only happen when my purchase of the Sydney units settles in February.’
He said ‘I don’t know that’s a good idea, because you won’t have any security for getting your trade dollars if we let Dan have the title deed early.’
I said ‘That’s okay, I trust Dan to do the right thing by me. He will give me the trade dollars. Anyway, he will want his $50,000.00 cash back. The only thing that I am worried about is if my purchase of the Sydney units is delayed or falls over, because it hasn’t exchanged yet. But Paul Mahon from Tradewise has assured me that it will be right, and they will definitely be ready to settle in February.’
He said ‘I still don’t think that it’s a good idea, because you have no security.’
I said ‘I really want to help Dan, he must be pretty desperate, because he is putting a lot of pressure on me to do this, so lets just do it. I think that it will be ok.’
I said ‘That’s ok. I will sign it for you.’”He said ‘Ok, if that’s what you want to do, but I will have to send you a letter saying that you will have no security, to cover myself. You will have to sign it and send it back to me.’
I accept this evidence.
60 Ms Humphrey said in her second affidavit (Exhibit A, p 184, para 5 (l)) that Mr Guy did not explain to her what the implications might be for her and the Company if no security was obtained for payment of the trade dollars by the Pogsons. Ms Humphrey said she did not appreciate how extraordinarily unusual the settlement arrangement proposed by the Pogsons was. Ms Humphrey said Mr Guy certainly did not convey to her that he felt strongly about her not proceeding with the arrangements set out in Mr Pogson’s fax of 11 January 1999, nor did Mr Guy advise her about any other options which might have given the Company a greater degree of protection.
61 Ms Humphrey said she received no advice from Mr Guy to obtain independent legal advice or that she should obtain independent financial advice. Nor did Mr Guy give her any advice that any financial pressure that Mr Pogson was under, or financial difficulties that he was facing with regard to completing other transactions, were not really her problem and that she ought not do something which, in the circumstances, involved considerable risk, particularly as Mr Pogson was pressuring her to do it.
62 Next, on 13 January 1999, Ms Humphrey received Mr Guy’s fax of that date in the following terms:
“I refer to our telephone conversation with you today and now attach the instruction notes from Dan Pogson. It is essential that you confirm, in writing, your instructions to me that the settlement of this matter is to proceed in accordance with these notes.
I note that you have instructed me by telephone that the settlement details are essentially as contained in the letter from Dan Pogson and that you are wishing to proceed on that basis.
Please advise me in writing should there be any variation to these instructions.”I confirm your instructions to me are to complete the settlement before the balance of settlement funds are made available to you and that the Trade Dollars will be paid to you at a date some time in February. I have advised you that there will be NO security for this payment. Notwithstanding this you have instructed me to proceed with the settlement.
63 Ms Humphrey signed the copy of Mr Pogson’s fax to Mr Guy and made the following notation on the bottom of it, with reference to the last paragraph on page 1:
I have forwarded $4000 to Dan Pogson in lieu of $5000 towards the $55,000. effectively Dan has now paid the remaining $1000.”“No – I have made arrangements with Dubbo City Council and this is an entirely different matter.
64 On page 2 of Mr Pogson’s fax to Mr Guy, Ms Humphrey wrote at the bottom:
“Yes I have read this and agree except for the alteration I have made above (signed) Lyndell J Humphrey 13/1/99.”
65 Ms Humphrey said she sent the documents back to Mr Guy on 14 January 1999. After she did so, but on the same day, Mr Pogson phoned her asking for her fax number to send documents to her relating to the $50,000 loan. She asked him what was in the documents and he told her that the loan had to be repaid in February and providing she did so, it would be interest free. If not repaid, then interest would be charged at 18% per annum. The 290,000 trade dollars would be paid to the Company when the $50,000 was repaid.
66 Ms Humphrey said she told Mr Pogson that 18% was a ridiculously high interest rate and she did not agree to it. She said she thought she should receive her 290,000 trade dollars “now” because the Pogsons were receiving the title deeds to the Property. Ms Humphrey said that Mr Pogson told her he would not change the interest rate, but she should not worry because it only applied if she was late in repaying the loan. At the same time, Mr Pogson told Ms Humphrey he would not pay her 290,000 trade dollars until she repaid the loan of $50,000.
67 Ms Humphrey said that she told Mr Pogson she needed to think about it, but he insisted the matter proceed. Ms Humphrey’s evidence was that she then had the following conversation with Mr Pogson as set out in paragraph 85 of her affidavit:
“He said ‘I need this signed and returned immediately. You have to settle with me tomorrow, or I will sue you. You don’t have any choice in this, because you agreed to sell me “The Angle”, and now you can’t settle, so sign these documents and send them back to me today, or you will be sued.’
He said ‘yes, so sign them and fax it back straight away, or I will sue you.’”I said ‘but it’s already late in the afternoon.’
68 Ms Humphrey said she was scared of Mr Pogson and was terrified that he would sue her, so she provided him with a fax number and signed the Loan Agreement as soon as she received it. She sent it back straight away to Mr Pogson by return fax.
69 The Loan Agreement signed by Mr Pogson and Ms Humphrey is at p 21 of exhibit 5 and is as follows:
“Loan Agreement for Loans
From D. Pogson to L. HumphreyLoan 1 - $30 000 from Jan … to March 8th ‘99
No fees or interest to be charged.Loan 2 - $20 000 from Jan … to Feb 19th
No fees or interest to be charged.A penalty rate of 18% per annum, paid monthly in arrears, applies if the above dates are exceeded.
(signed) L Humphrey (borrower)
Date: 14/1/99”(signed) D Pogson (lender)
70 Settlement of the sale of the Property took place on 15 January 1999.
71 Ms Humphrey’s evidence was that the contract for the purchase of the Pitt Street strata units was never exchanged with the owner of those units. In this respect, Ms Humphrey’s evidence was that in late 1998 she understood that contracts for the purchase of these units had been exchanged but she found out later in 1999 (much to her surprise) that no exchange had occurred (T 172.36). Ms Humphrey said she thought that once she had sent her signed copy of the contract to the vendor that she had effected an exchange. I accept this evidence. Ms Humphrey is a naïve person and my assessment of her is that she has a poor understanding of conveyancing transactions even though she has bought and sold quite a few properties. To the best of her recollection, Ms Humphrey said she thought she had sent the contract for the purchase of the Pitt Street units to the vendor in late November or very early December 1998, more likely, late November (T 172.55). That was her best recollection (T 173.4) and I accept this evidence.
72 With regard to the purchase of these strata units, Ms Humphrey’s evidence was that she intended to borrow money against the strata units to repay the $50,000 advanced to her by Mr Pogson. Her evidence was (T 173.18):
“ … the whole point of this issue with the strata units is that I needed to be able to borrow up obviously to get the trade dollars from Mr Pogson. I had to pay him back his loan, and the idea was that I needed to be able to borrow that extra $50,000 from Mr Pogson on top of whatever borrowings I needed to purchase the Sydney units, which is why I needed them to be at that 50/50, 50 cash, 50 trade dollars that the original contract was in. Because I could only borrow about 60% against the commercial property at that time. That gave me enough to pay Mr Pogson his $50,000, or would have done had it come off.”
73 Ms Humphrey’s evidence was that during the course of 1999 she was offered several properties to purchase using trade dollars, but none of the transactions proceeded.
74 In mid to late 1999 Mr Pogson began pursuing Ms Humphrey to pay him interest on the $50,000. Mr Pogson had been able to raise this amount because he could borrow against the Property when he received the title deeds on settlement. In fact, the $50,000 amount was only part of a $110,000 loan which the Pogsons obtained against the security of the Property.
75 Ms Humphrey said that because she could not “find a single deal on which to spend the trade dollars” (meaning the trade dollars owed to her by the Pogsons), she became disheartened and in late 1999 asked Mr Pogson to come to some other arrangement to pay for the Property, but he declined to do so. It was around this time that Ms Humphrey saw a newspaper advertisement in either the Trading Post or Sydney Morning Herald, in which someone was advertising the sale of Tradewise dollars for ten cents cash for every Tradewise dollar.
76 The upshot was that Ms Humphrey sought to contact Mr Guy between March and May 2000. It was difficult to do so because Mr Guy was away from the office for lengthy periods in China. It must also be said, in my assessment, that Mr Guy did not go out of his way to accommodate Ms Humphrey and I consider his approach to this aspect of the matter was to treat Ms Humphrey as an unimportant client. Eventually, Ms Humphrey was able to see Mr Guy at the end of May 2000. She told him she was unhappy that she had been unable to purchase another property with the trade dollars owed to her by the Pogsons. Mr Guy agreed that the position was unsatisfactory and so he said he would phone Mr Pogson to see what he could do about it. Ms Humphrey said that Mr Guy said (para 96 of her affidavit):
“Perhaps (Mr Pogson) will agree to hand back your Title Deed, as the matter has not settled, and we will just put things back the way they were.”
77 Mr Guy then phoned Mr Pogson, told him that the situation was unsatisfactory and suggested that things be put back the way they were.
78 Ms Humphrey was unable to hear Mr Pogson’s response because the call was not made on speakerphone. However, Mr Guy told her that Mr Pogson would not agree to put things back the way they were and he further said (para 96) to Ms Humphrey:
“I will write to him about this, but if he continues to refuse to put the situation back as it was, then I’m afraid that there is nothing more that I will be able to do, and I will have to then refer you to find another Solicitor to handle the matter from here. That is all I’m going to be able to do. I’m sorry.”
79 Mr Guy then wrote to Mr Pogson on 9 June 2000 (exhibit 5, p 35) as follows:
“Lyndell Humphrey has recently been in to see me and has expressed her concern that the above transaction remains incomplete. More particularly she has found that the value of the Trade Dollars is very low and her ability to use them greatly restricted.
Please advise me.”As this transaction is not completed she is seeking a way of rectifying the inability of either party to complete same by going back to the position she and you were in before entering into this deal.
Mr Guy sent a copy of this letter to Ms Humphrey.
80 On 12 July 2000 Ms Humphrey terminated Mr Guy’s instructions, stating in her letter to him of that date (exhibit 5, p 37):
“As it is no longer possible for you to provide independent legal advice regarding my best interests in my matter with Dan Pogson, I wish to transfer my file in this matter to Dan O’Keefe, Macquarie Law, Dubbo.”
81 When Mr Guy sent his file to Mr O’Keefe in July of 2000, it included a copy of the whole contract for the sale and purchase of the Property. Ms Humphrey said that this was the first time she had ever seen the complete contract.
Evidence of Mr Guy
82 Mr Guy’s evidence in chief is contained in exhibit 3.
83 Mr Guy was admitted as a solicitor of the Supreme Court of New South Wales on 11 May 1979. Mr Guy has been the principal of Guy & Associates since 1 July 1984. The mainstay of his practice has always been residential, commercial and rural conveyancing.
84 In the mid 1990’s Mr Guy was a member of the Law Society of New South Wales Conveyancing Review Committee. He remained on the committee for two or so years.
85 Mr Guy said that prior to November 1998 he acted for both Ms Humphrey and the Pogsons in relation to the sale by Ms Humphrey to the Pogsons and Mr Lapham of Ms Humphrey’s Hunter Street flats for $160,000, of which 35,784.04 was payable in trade dollars. Mr Guy acted for Ms Humphrey and the Pogsons on the sale by the Pogsons to Ms Humphrey of the Coonabarabran property for $160,000, in respect of which 30,000 trade dollars was payable by Ms Humphrey to the Pogsons. These two conveyancing transactions were, for all intents and purposes, property swaps engaged in by Ms Humphrey and the Pogsons.
86 Mr Guy said he also acted for the Pogsons when they were proposing to purchase Ms Humphrey’s property at 20 Algona Street Dubbo, but this did not proceed. BBS & O were acting for Ms Humphrey on that transaction.
87 With regard to the sale of the Property by the Company to the Pogsons, Mr Guy agreed that Ms Humphrey telephoned him in or about mid October 1998 and they had the discussion along the lines set out in paragraph 44.
88 With regard to acting for both parties to a property transaction, Mr Guy said his usual practice was to say to each client nothing more than words to the following effect:
“I am prepared to act for both sides, but be aware that if a dispute arises between you then I will cease to act for all the parties.”
89 Mr Guy had no recollection of saying this to Ms Humphrey, but said he would have done so because of his usual practice.
90 Mr Guy recalled speaking to Mr Pogson shortly after he had spoken to Ms Humphrey. He could not recall what was said, but based on his usual practice, Mr Guy said he would have made the same statement to Mr Pogson, set out in paragraph 88 above.
91 With regard to his retainer from the Company, Mr Guy stated his understanding of it in paragraph 11 of exhibit 3 thus:
“I understood from my initial telephone conversations with Lyndell Humphrey and Daniel Pogson, in or about November 1998, that I was retained only to document the transfer of (the Company’s) title in (the Property) at Dubbo to the Pogsons.”
92 On receipt of Ms Humphrey’s instructions Mr Guy said that a new matter form was prepared. It is located at p 3 of exhibit 5. The type of matter described is “Conveyancing”. The reference is “Sale of part of “The Angel” (sic) Dubbo of 52.826 hectares” and the person acting is referred to as “KL”.
93 Mr Guy said “KL” was a reference to Kirsti Lipinstale, a paralegal employed by him. In fact, as things turned out, Ms Lipinstale had the day to day conduct of the matter.
94 Ms Lipinstale ceased her employment with Mr Guy in August 2005 when she left Australia to live in Canada.
95 A file note made by Ms Lipinstale is at p 4 of exhibit 5 and it records, with reference to the sale price of the Property, $290,000 the following:
285,000 – trade dollars”“$5000 – deposit
96 Mr Guy said he prepared draft contracts for sale using the draft provided to him by BBS & O, as a consequence of which “it was therefore only necessary for me to prepare the front page of the contract”.
97 This evidence demonstrates to my satisfaction that not only was Mr Guy prepared to take shortcuts, as he had done with regard to the swap of Coonabarabran for the Hunter Street flats, but that his approach was also very slipshod because the Special Conditions prepared by BBS & O were not entirely appropriate for the sale of the Property to the Pogsons. Moreover, there was no reference in the Contract to trade dollars. Further, when pressed about this in cross-examination, Mr Guy conceded that it was Kirsti Lipinstale who put the contract together and it was Kirsti Lipinstale who sent out the front page to Ms Humphrey for execution by the Company (T262.4). In all of the circumstances, I am satisfied that Mr Guy paid no attention to what was going on. He neither prepared the front page of the Contract nor did he properly supervise Ms Lipinstale in the preparation of the contract.
98 Although Mr Guy said he looked at the Contract when it went out, I do not believe him because there was no reference in the contract to trade dollars (T 263.1) and this would have been obvious if he had looked cursorily at the document. Moreover, the decision to send the front page only was for unacceptable reasons of expediency (T 267.50 and T 268.43).
99 During the period November 1998 through December 1998 Mr Guy conceded, at most, he would not have had more than three or four conversations with Ms Humphrey (T 259.46). He could not recall how many of those took place before contracts were exchanged (T 260.1). In this respect it was not his practice to make notes of telephone conversations (T 260.14).
100 In relation to Ms Humphrey’s version of the telephone conversation which she said she had with Mr Guy in late November 1998, set out in paragraph 55, Mr Guy said he had no recollection of the conversation taking place, he considered it most unlikely that such a conversation would have occurred and based on his usual practice, he would not have gone ahead with the exchange if he had received these instructions (T 273.12).
101 Mr Guy conceded that he could not recall having spoken to Ms Humphrey prior to his firm sending the front page of the Contract to her on 17 November 1998, other than the initial discussion in which Ms Humphrey asked him to act for the Company (T 263.52). Mr Guy sought to explain this away at T 264 by saying that although he could not recall, he must have spoken to her because the front page would otherwise not have been sent for execution by the Company. In my assessment, this was pure speculation on Mr Guy’s part and I do not accept his evidence about it.
102 Mr Guy agreed that Ms Lipinstale had written in the completion dated 16 December 1998 and that he did not know how that came to be inserted (T 267.19). He conceded that it was most likely that the 16 December 1998 date had been inserted in the Contract after the Company had signed and returned it to his office (T 269.32). In truth, he had no way of knowing whether Ms Humphrey had given him instructions to insert that date (T 270.7).
103 Mr Guy was aware that Mr Pogson had arranged finance in the amount of $110,000 in connection with the purchase of the Property. In that respect Mr Guy received a letter from M J Duffy & Sons (exhibit 3, p 13), on 13 January 1999. That firm was acting for the prospective mortgagees. Their letter stated that $110,000 was being advanced by these mortgagees to the Pogsons. I am satisfied Mr Guy knew that the Pogsons were very anxious to complete the transaction and the inference I draw is that it was the Pogsons who insisted on 16 December 1998 being inserted in the Contract and that this was done by Ms Lipinstale without reference to Ms Humphrey. In this respect, Mr Guy could not recall whether or not he had advised Ms Humphrey that contracts had been exchanged. I am satisfied that he did not.
104 Mr Guy made no enquiries between 3 December and 16 December 1998 to find out what was happening. He assumed that Ms Lipinstale was making enquiries, but there is no evidence to support this assumption (T 275.31), nor was there any evidence in the file to suggest any enquiries had been made concerning the requirements of the Company’s outgoing mortgagee, between 3 December and 16 December 1998, in anticipation of a settlement on 16 December 1998 (T 276.40).
105 By his letter of 13 January 1999 (exhibit 3, p 15), Mr Guy instructed M J Duffy & Sons to attend on the settlement on behalf of his clients at the discharging mortgagee’s solicitors office in Taree. He set out in the letter how the Pogsons’ loan of $110,000 was to be disbursed. This included a cheque of $55,000 to be paid to Stacks, Solicitors, to discharge the mortgage given by the Company over the Property.
106 Mr Guy saw Mr Pogson’s fax of 11 January 1999 when it came in because the phone number written on the top of the fax is in Mr Guy’s handwriting (T 281.15). Although initially Mr Guy asserted that he spoke first to Ms Humphrey as opposed to Mr Pogson, when pressed, he conceded he really did not know to whom of the two he spoke first (T 285.42). Mr Guy also conceded that until he got the fax of 11 January 1999, no enquiries whatsoever had been made of Stacks, solicitors, in connection with the discharge of the Mortgage. There was nothing in his file to indicate any such enquiries had been made (T 286.20-34).
107 Mr Guy agreed that the arrangement outlined in Mr Pogson’s fax of 11 January 1999 was somewhat unusual. He said he made no enquiries of Mr Pogson about the meaning of the words “this is in fact a short-term loan from me to L Humphrey. Others involved probably don’t need to know that” (T 286.36). This to my mind demonstrates that Mr Guy was quite careless. Here was one client (Mr Pogson) telling him not to provide certain information to “others”, and yet Mr Guy had another client (the Company) who had a different interest. Ms Humphrey had a different interest as well. Mr Guy was unconcerned about these matters.
108 Mr Guy said he spoke to Ms Humphrey on 13 January 1999 after he received Mr Pogson’s fax set out in paragraph 52. In relation to the telephone conversation, Mr Guy’s evidence in para 26 of exhibit 3 was:
“The purpose of the call was to advise her that I had received the facsimile from Mr Pogson which I refer to in paragraph 23 above and to obtain a facsimile contact number from her. In relation to paragraph 81 of Ms Humphrey’s (sic) affidavit, it is likely that I said to her words to the following effect: ‘You will have no security for the payment of the balance of the sale price if you settle on the basis that Mr Pogson is proposing’. I have no recollection of the precise words spoken, but the contents of the facsimile which I sent later that day are consistent with me giving such a warning to Ms Humphrey.”
109 Notwithstanding what he put in his affidavit in para 26 of exhibit 3, Mr Guy attempted in cross-examination at T 288.53 to convince the Court that he told Ms Humphrey she would be running a severe risk if she proceeded with the transaction on the basis of the matters set out in Mr Pogson’s fax. I do not accept this evidence. Essentially what emerged from his cross-examination in my assessment was that Mr Guy had no recollection at all of what he said to Ms Humphrey. Mr Guy could not recall Ms Humphrey telling him she had agreed to purchase some units in Sydney and that she was going to use the trade dollars from the sale of the Property to complete the Sydney unit transaction, or that she told him she did not expect the settlement to take place until early February. Also, he did not recall Ms Humphrey ever telling him she was willing to help Mr Pogson because Mr Pogson was in so much trouble. In this respect, I prefer Ms Humphrey’s evidence as to what was discussed. That evidence was compelling because Ms Humphrey felt pressured by Mr Pogson and so she remembered clearly what occurred, whereas Mr Guy did not.
110 It did not occur to Mr Guy at the time that Ms Humphrey was in need of independent advice (T 290.41). When it was put to him that she was, he rejected this. He thought it was sufficient for him to advise Ms Humphrey that she would not have any security if she went ahead with the proposal (T 290.55 –2 91.6).
111 Mr Guy agreed he had never met Ms Humphrey and that he chose to deal with such an important matter by phone. When asked by the Court how he would know in those circumstances that Ms Humphrey fully understood what he was telling her, he said it was not uncommon for these sort of “commercial matters” to be dealt with by phone. He did not consider it was necessary for the client to be sitting opposite him (T 291.24). I found this evidence wholly unconvincing. Ms Humphrey’s presentation is that of a person who is nervous and unsure of herself. This would have been obvious to Mr Guy when he finally met Ms Humphrey in May 2000. And it would have been obvious to Mr Guy if he had personally interviewed Ms Humphrey in January 1999 or earlier.
112 Mr Guy conceded that he made no mention in his letter to Ms Humphrey of 13 January 1999 that there were other alternatives if she did not have security and that he was aware, when he wrote his letter of 13 January 1999, that Mr Pogson was under pressure from his bank to complete the transaction (T293.10).
113 Mr Guy agreed at T 307.42 that the Company initially received a $5000 deposit from the Pogsons, but that Ms Humphrey had refunded $4000 to Mr Pogson, resulting in the Company receiving only $1000 from the Pogsons under the Contract, plus the $50,000 advanced to the Company by Ms Humphrey on settlement from the loan she received from Mr Pogson.
114 Mr Guy also conceded that he did not bring to Ms Humphrey’s attention the fact that the Pogsons could not force her to complete the transaction without serving a 14 day notice to complete (T 340.55).
115 With regard to Ms Humphrey’s evidence that she told Mr Guy that Mr Pogson was desperate about the contract because he had already exchanged on a property in Sydney and was going to be sued if he could not settle by mid January, Mr Guy’s evidence in paragraph 27 of exhibit 3:
“I have no recollection of having been told that by Ms Humphrey. As at that time I was not acting for Mr Pogson in relation to any proposed purchase of property in Sydney and I have no recollection of his having informed me of any proposed purchase of property in Sydney. In those circumstances I think it is unlikely that Ms Humphrey said those words to me. I have no recollection of being told by Ms Humphrey that Mr Pogson was “in trouble” or pretty desperate” and that does not accord with my recollection of the circumstances. I also have no recollection of being told by Ms Humphrey that she was proposing to purchase Sydney units.”
I do not accept this evidence. Mr Pogson’s fax to Mr Guy dated 11 January 1999 made it abundantly clear that the Pogsons were desperate to settle the purchase of the Property. In this respect, I found Ms Humphrey’s version of the discussion she had with Mr Guy compelling and I prefer her evidence to his in this respect.
116 Mr Guy said that he first saw the Loan Agreement in an undated and unsigned form when it was faxed to him by Mr Pogson on 14 January 1999. He was not provided with a signed copy until sometime after that date.
117 With regard to the meeting in his office with Ms Humphrey in June 2000, Mr Guy recalled her expressing concern that the value of the trade dollars was very low and that her ability to use them was greatly restricted. He generally agreed with her evidence about what took place at the meeting except he said he did not say that if Mr Pogson continued to refuse to put the situation back as it was, that he would have to refer Ms Humphrey to another solicitor. Again, he fell back on his usual practice and asserted that he would have said to Ms Humphrey that if the dispute between her and Mr Pogson could not be resolved, that he would have to cease acting for Ms Humphrey and she would have to seek independent advice.
118 The first time Mr Guy was aware that Ms Humphrey was “unhappy with the work carried out by my firm” was when the statement of claim was served on him in 2004.
The Law
119 As was abundantly clear from Mr Guy’s own evidence, he was a skilled practitioner in the area of conveyancing. In this respect, the comments made by Malcom AJA in Heydon v NRMA Limited (2000) 51 NSWLR 1 at 53.146 are of assistance:
“Both barristers and solicitors owe a duty of care to those whom they advise or for whom they act. … their duty is to exercise reasonable care and skill in the provision of professional advice. The standard of care and skill is that which may be reasonably expected of practitioners. In the case of practitioners professing to have a special skill in a particular of the law, the standard of care required is that of the ordinary skilled person exercising and professing to have that special skill.”
120 His Honour went on to say at 53.147:
“In this context the content of the duty of care and the liability is the same whether it is founded on contract in the case of a solicitor, or whether it is founded on a duty of care in tort in the case of a barrister. In each case the duty is to apply the relevant degree of skill and exercise reasonable care to carry out the task. There is no implied undertaking that the advice is correct, but only that the requisite degree of professional skill and care has been exercised in the giving of the advice. Of course, where there is reason for doubt or there are risks which a person possessing the relevant degree of skill and competence should perceive, it follows from the above that there may be a duty to warn of the kind recognised by their Honours in Rogers v Whitaker (1992) 175 CLR 479. Thus, in Hawkins v Clayton (1988) 164 CLR 539 (at 583-585), it was held by Deane J that, in the case of a solicitor, the circumstances may give rise to a duty to do more than simply perform the task defined by his instructions, if circumstances arose giving rise to a real and foreseeable risk of economic loss by the client, or in particular circumstances, even a person who is not a client but who may be adversely affected.”
121 Solicitors owe a fiduciary duty of loyalty to their clients in the discharge of their retainer. In Beach Petroleum NL v Kennedy (1999) 48 NSW LR 1 at para 188 the Court said:
“Even in the case of the solicitor/client relationship, the duty is not derived from the status. As in all such cases, the duty is derived from what the solicitor undertakes, or is deemed to have undertaken, to do in a particular circumstance. Not every aspect of the solicitor/client relationship is fiduciary.”
122 In Clark Boyce v Mouat (1994) 1AC 428, the Privy Council set out the accepted rule of practice for a solicitor acting for both parties in a conveyancing transaction as follows:
(b) such consent has been given in the knowledge that there is or may be a conflict between the parties and that as a result:“(a) where the interests of the parties to the transaction may conflict the solicitor may only act for more than one party provided he or she has obtained the informed consent in writing of those parties to the solicitor acting for them;
2. the solicitor may be disabled from giving advice to one party which conflicts with the interests of the other or others of them.”1. the solicitor may be disabled from disclosing to each party the full knowledge which he or she possesses as to the transaction; or
123 Whilst Clark Boyce v Mouat does not lay down a general rule of law to the effect that a solicitor should never act for both parties to a transaction where their interests may conflict, nevertheless, it is a correct statement of what a solicitor is required to do in those circumstances: Citicorp Australia Limited v O’Brien (1996) 40 NSWLR 398 at 412.
The Evidence of Mr Moses
124 Mr Neville Moses, a highly qualified and very experienced solicitor, gave expert evidence in his affidavit made on 16 January 2006 (p 118 of exhibit A).
125 Mr Moses said that the accepted rules of practice regarding a solicitor acting for both parties in any transaction including the sale of real estate where those guidelines laid down by the Privy Council in Clark Boyce v Mouat.
126 Unsurprisingly, Mr Moses said that it was also usual practice for a solicitor acting for both parties to immediately cease acting for one (or preferably both) once a conflict had arisen.
127 When he made his affidavit, Mr Moses, who was not required for cross-examination, had not seen Mr Guy’s affidavit.
128 In paragraph 18 of his affidavit Mr Moses stated that Mr Guy did not give the usual warnings required by standard practice of the dangers associated with a solicitor acting for both parties. When expressing this opinion, Mr Moses referred to the evidence of Ms Humphrey set out in paragraphs 54-62 of her affidavit. In this respect, although only the first sentence of paragraph 54 was admitted into evidence, it seems to me the balance of paragraph 54 was not an essential foundation of Mr Moses’ opinion. Similarly, although paragraph 55 was not admitted into evidence, other evidence in admissible form concerning those matters was before the Court. Likewise, although paragraphs 57 and 58 and portions of paragraph 59 were rejected, the evidence before the Court was that Ms Humphrey’s enthusiasm concerning Trade Dollars was brought about through Mr Pogson’s influence over her. As well, I have accepted Ms Humphrey’s evidence about her proposed purchase of the Pitt Street strata units using trade dollars.
129 Mr Moses noted that the Mr Guy had not explained to Ms Humphrey the provisions of the Contract because he had only sent her the front page of it for the purpose of execution. Unsurprisingly, Mr Moses said the standard practice for a solicitor acting for a vendor was to ensure that the client was fully apprised of the terms of the contract for sale before entering into it. Although the contract in this case was similar to the one prepared by BBS & O, nevertheless Mr Moses could not see any evidence that Mr Guy had taken steps to ensure that the earlier contract had been explained to Ms Humphrey in a satisfactory manner.
130 Mr Moses also gave evidence that the usual time for settlement of a contract for the sale of real estate in New South Wales was 42 days. In this case, with a settlement date of 16 December 1998, less than one calendar month for settlement was allowed. The effect of Mr Moses’ evidence was that it was important for Mr Guy to ascertain from Ms Humphrey whether the settlement date in the contract was satisfactory.
131 Mr Moses pointed out that the Company needed to be in a position to discharge the mortgages on the Property being sold in order to give clear title. He said in para 25 of his affidavit that by not tying the sale to the purchase of the Sydney units, which would have given the Company security to borrow funds to repay the mortgage, Mr Guy left the Company in a position where it could not complete the contract for sale.
132 Importantly, Mr Moses gave the following evidence in para 26:
“It is usual when acting for a vendor who is selling real estate to ascertain from the vendor the name of any party which holds a mortgage over the property which is being sold and to ensure that the vendor will be in a position to discharge the mortgage from the proceeds of sale at the time of completion. … Accordingly in my view it was incumbent upon (Mr Guy) as a matter of usual practice to ensure that (the Company) understood that it must be in a position to discharge the mortgages from funds at the time the sale was to be completed. In that regard, the copies of the certificates of title included in the contract for sale clearly indicated that there were mortgages on the titles which would need to be discharged before or on completion and unless the solicitor was aware that the mortgagees in question would accept “trade dollars” in lieu of cash, to discharge the mortgages it should have been obvious to him that (the Company) would need to provide funds to enable a clear title to be given.”
133 With regard to the arrangement made by Ms Humphrey to borrow $50,000 from Mr Pogson to be used to discharge the mortgage given by the Company over the Property and to transfer title in the Property to the Pogsons, Mr Moses gave the following evidence in his affidavit:
“To say that this arrangement was unusual is a huge understatement. It involved the vendor in effect transferring the whole of the interest in the property to the purchaser in consideration only of a loan of $50,000.00. It clearly placed the purchaser in a most favourable position in that he had given only a small part of the consideration for the transaction to the vendor (assuming “Trade Dollars” were equivalent to cash) and he had the right to deal with the property as registered proprietor without further interference from the Second Plaintiff or the vendor company.
It seems that the solicitor did warn the Second Plaintiff that to proceed on this basis left her (or Baiyai) with no security for the repayment of the balance of the money due for the purchase of the property. …
Obviously if a client is fully informed about the consequences of entering into an arrangement which is not illegal and provided the client has sufficient commercial sophistication to understand the implications of such an arrangement then notwithstanding the fact that a solicitor may advise against taking such action, if the client wishes to proceed then it is not for the solicitor to impose his or her judgment.
However in such circumstances it is usual practice for the solicitor to do all things possible on his part to ensure that his client does understand the ramifications of the course that the client proposes to take. In addition if the solicitor is able to suggest alternative ways of proceeding which may better protect the client’s interests then he or she should as a matter of usual practice explore those possibilities with the client.
In particular if the solicitor is acting for both parties in such circumstances it is usual practice for the solicitor to advise the client that the client should obtain independent legal advice before entering in the arrangement. This is so that the client may receive legal advice from a practitioner who is not subject to the restraints imposed by the doctrine in Clark v Mouat .
In fact in my opinion the obligation of the solicitor to ensure that the Plaintiff received independent advice in these circumstances was inter alia among other things to protect the purchaser from the allegation that the Second Plaintiff had been the subject of undue pressure or influence when she entered the arrangement.”In the present case in my opinion it was all the more important for the solicitor to indicate to the Second Plaintiff that she and Baiyai should obtain independent legal advice by virtue of the fact that the purchaser in this matter was apparently a longstanding client of the solicitor whereas the Second Plaintiff was not (although the solicitor had acted for her on a previous occasion). Independent advice would ensure that there would be no suggestion that the Third Defendant had given advice favouring his longstanding client.
134 Mr Moses postulated that the Company’s position, when it agreed to release the title deeds in exchange for receiving the $50,000, could have been protected, for example, if a second mortgage had been given by the Pogsons over the Property. The point Mr Moses made was that Mr Guy did not attempt to explore any possible solutions to the problem.
135 Mr Moses went on to say, with regard to the Company agreeing to transfer the title to the Property without being paid the balance of the purchase price, that in his experience this was “so extremely rare as to be almost unique” (para 38 of his affidavit). He had not himself been involved in any transaction where a vendor had left a significant part of the purchase price unpaid without obtaining a mortgage back on the Property, or security over something else.
136 Moreover, Mr Moses described the nature of the commercial transaction between Ms Humphrey and Mr Pogson, regarding the Loan Agreement, as being inherently unfair (para 39). This was illustrated by the fact that monies which Mr Pogson was lending to Ms Humphrey were borrowed by him by way of a loan secured over the Property itself. In effect, Mr Pogson was using the Company’s Property to make a loan to Ms Humphrey which would be used to discharge the Company’s debt in return for Ms Humphrey paying a very high interest rate. This led Mr Moses to conclude in para 40:
“In my view acting in accordance with usual practice an independent solicitor consulted by (Ms Humphrey) at the time when the arrangement was proposed by (Mr Pogson) would have advised her strongly not to agree to it and would have explored with her other ways in which the matter could have been resolved.”
A Mr Guy’s Retainer
137 In his Amended Defence, Mr Guy admitted, in answer to para 19 of the ASOC, that he acted for the Pogsons as their solicitor on the purchase of the Property.
138 In answer to paragraph 22 of the ASOC, Mr Guy admitted that he was retained by the Company in or around November 1998 to act for it on the sale of the Property to the Pogsons. In light of this admission, which was made at the very beginning when Mr Guy’s defence was filed on 16 September 2005 and verified by him, his assertion in paragraph 11 of his affidavit made on 26 April 2006, that he understood from his initial telephone conversations with Mr Pogson and Ms Humphrey that he was retained only to document the transfer of title to the Property to the Pogsons was disingenuous and did not serve him well in terms of his credibility. Moreover, such a statement flew in the face of the letter which Mr Guy sent to BBS & O dated 9 November 1998 (set out in para 44 above) and the contents of the new matter form referred to in para 84 above. More to the point, the contract for sale (exhibit 5, p 7A), identified Mr Guy’s firm as the “Vendor’s solicitor”. He conceded that in this context such a description meant he had a general retainer (T 250.50) and that he was acting for the Company with all that that entails, including advising in connection with the contract, the settlement of the transaction and related matters (T 246.4). By his own evidence, therefore, Mr Guy had described his retainer.
139 Mr Guy agreed that he also had a general retainer to act for the Pogsons on the purchase and that they had agreed to pay the Company’s legal costs in connection with the sale amounting to $1,720.00 (exhibit J). Mr Guy agreed that Ms Humphrey had told him from the beginning that this was the arrangement she had made with the Pogsons.
140 When Mr Guy accepted his retainer from the Company to act for it on the sale of the Property, he knew the purchase price was being paid in trade dollars (T 263.38). It is abundantly clear from his evidence that he was well aware that one trade dollar was not worth anything like $1.00.
141 Mr Guy’s counsel acknowledged that Mr Guy owed the Company an obligation to exercise reasonable care and skill in giving advice to the Company and that in his case, Mr Guy’s standard of care was that of the ordinary skilled conveyancing solicitor acting on a sale of the Property. In para 27 of her written submissions, counsel also acknowledged that Mr Guy owed the Company a fiduciary duty in connection with this retainer.
B Matters arising out of Mr Guy accepting a retainer to act for
both the Company and the Pogsons
142 The plaintiffs allege that Mr Guy failed to advise them to obtain independent legal advice about the proposed sale of the Property [ASOC paragraph 24 (a); Revised Statement of Issues para 6(a)(i)].
143 Mr Moses’ opinion was that Mr Guy did not give the Company the usual warnings required by standard practice of the dangers of a solicitor acting for both parties in a conveyancing transaction. I accept Mr Moses’ uncontradicted evidence about what the standard practice was and I am satisfied that Mr Guy had a duty of care to the Company to advise it to obtain independent legal advice about the proposed sale of the Property.
144 In this respect, it was not disputed that Mr Guy did not give such a warning. His evidence was that he could not recollect what he told Ms Humphrey but that he would have followed his own practice which was to advise clients in these situations that he would only act for them on the basis that, if a dispute occurred, he would cease acting. On balance, because it was his standard practice, I am satisfied that Mr Guy made this statement to Ms Humphrey. In the case of Ms Humphrey, I am satisfied that she simply forgot that Mr Guy said words along these lines to her. This is hardly surprising, as Ms Humphrey was not in conflict with the Pogsons at the time she gave Mr Guy instructions to act for the Company on the sale of the Property. As I said earlier, Ms Humphrey was a naïve person and did not appreciate that there could be problems which might arise between her and the Pogsons and that there already existed a potential conflict of interest.
145 Based on Mr Moses’ uncontradicted evidence, given to the Court on a truly disinterested basis, I am satisfied that Mr Guy’s standard practice fell well short of the mark. Secondly, I am satisfied that Mr Guy breached his duty of care to the Company because he failed to advise Ms Humphrey to obtain independent legal advice about the proposed sale of the Property. In my assessment, Mr Guy was very cavalier in his approach to the whole transaction because, in truth, he believed that all he was doing was documenting the transfer of the title (see paragraph 91 of this judgment).
146 I have accepted Ms Humphrey’s evidence that she would have taken independent advice. Had Ms Humphrey done so, then the inference is that she would have received advice from an independent solicitor about the matters referred to in paragraphs 20, 21 and 23 of Mr Moses’ affidavit. The result would have been that the independent solicitor would have received instructions that exchange of contracts could only take place on the basis that settlement was to occur only when the Company or Ms Humphrey was able to complete the purchase of the Pitt Street units. Given the urgency attaching to Mr Pogson’s situation regarding his overdraft, such an arrangement would not have been satisfactory to the Pogsons and contracts would not have been exchanged in the first place.
C What advice was given concerning the Contract and did Mr
Guy fail to exercise reasonable care and skill in giving the
advice
147 The plaintiffs allege that Mr Guy failed to:
a. Adequately explain the provisions of the Contract,
b. Advise the Company to ensure that completion of the Contract should be made conditional upon completion of the purchase of the Pitt Street strata units and,
d. Ensure the Company understood it must in a position to discharge the mortgage at the time the sale was to be completed.c. Enquire about the mortgage over the Property, and how the Company intended to discharge it.
[ASOC para 24 sub paras eii, eiii; Revised Statement of Issues para 6 (b), (b), (e), (f), (g), (h) & (i).]
148 I am comfortably satisfied that Mr Guy did not properly or adequately explain to Ms Humphrey the terms and conditions contained in the Contract. First of all, his firm only sent the front page of it for the purpose of execution. Secondly, although it was based on the earlier draft prepared by BBS & O for the proposed sale to Mr and Mrs Searle, Mr Guy took no steps to satisfy himself that the earlier contract had been explained to Ms Humphrey in a satisfactory manner. The front page of the Contract, with reference to the price, deposit and balance payable on settlement, refers to Australian dollars and there is no mention made of trade dollars. On the face of it, therefore, the Contract was misleading. A prudent solicitor in the position of Mr Guy needed to check with his client, through Ms Humphrey, not only what the position was, but to change the front of the Contract to accurately reflect the bargain between the Company and the Pogsons.
149 Most importantly, prior to contracts being exchanged, Mr Guy was aware, from the documentation he had received from BBS & O, that the Company had mortgaged its property. He made no attempt to find out what was owing under the mortgage before contracts were exchanged. In fact, he did not find out what was owing until just before settlement on 11 January 1999. As well, Mr Guy failed to point out to Ms Humphrey that the settlement date specified in the Contract was 16 December 1998 and he did not obtain her instructions as to whether or not this was satisfactory.
150 The importance of Mr Guy’s failings which I have referred to in para 149 is this. As Mr Moses said, it was important for Mr Guy to find out what his client’s wishes and intentions were before Contracts were exchanged. Had Mr Guy enquired of Ms Humphrey about the existing mortgage on the Property and how she intended to discharge it, I have no doubt that Ms Humphrey would have told him about her purchase of the Pitt Street units and her intention to borrow money on the security of those units because she told Mr Guy about these matters when Mr Guy telephoned her on 13 January 1999 to discuss settlement. For her part, Ms Humphrey expected Mr Guy to obtain her full and proper instructions and provide her with all appropriate advice. For his part, Mr Guy conceded that he had a general retainer to advise the Company in connection with the Contract, the settlement of the transaction and all related matters. Those related matters included enquiring about the existing mortgage and advising about the need to discharge it on settlement. Mr Guy failed to carry out his retainer in this respect. Had he done so, it would have led him to advise the Company and Ms Humphrey about the Pitt Street unit transaction. In this respect I am satisfied he would have received instructions from the Company that contracts should not be exchanged except on the basis that settlement would be tied in with, or subject to the settlement of, the purchase of the Pitt Street units. This would not have been acceptable to the Pogsons because the evidence makes it abundantly clear they were under pressure from their bank to clear the overdraft. In such a scenario it would have been inevitable that contracts would not have been exchanged; the transaction would simply not have proceeded.
D The Loan Agreement and Settlement
151 The plaintiffs allege that Mr Guy failed to adequately and properly advise them about the Loan Agreement and the consequences flowing from that failure regarding settlement.
[ASOC para 21 (d), (e) (f) (g); para 24 (f), (g) (i); Revised Statement of Issues para 7(b), (e) (f) (g)]
152 Mr Moses said in his evidence that it would be a huge understatement to describe the Loan Agreement as “unusual”. Importantly, I have accepted his evidence that it was usual practice for a solicitor to ensure the client understood the ramifications of the course the client proposed. Strictly speaking, the Company was the Client. Ms Humphrey, nevertheless, was in such a position as to be so adversely affected by the Loan Agreement that, for practical purposes, Mr Guy owed her the same duty of care as he owed to the Company.
153 I am satisfied that Mr Guy breached his duty of care to the Company and Ms Humphrey regarding the Loan Agreement and settlement. As I have said, Ms Humphrey is a person who is easily influenced. She felt pressured by Mr Pogson. In this respect, Mr Guy only spoke to her over the phone. He did not fully appreciate the sort of person she was, her naivety and her potential weakness (no disrespect intended) in being influenced by Mr Pogson. Had Mr Guy taken the time and trouble to speak with Ms Humphrey in person I am satisfied that these matters would have been exposed. It was not in Ms Humphrey’s interest to enter into the Loan Agreement because of its onerous interest terms. It was unfair, as Mr Moses has said. In addition, it was not in the Company’s interest to agree to let settlement proceed without payment of the purchase price and on the basis that the Pogsons got the title deeds. Mr Guy breached his duty of care to both plaintiffs in these respects. In doing so, Mr Guy preferred the interests of the Pogsons with the consequence that Mr Guy breached his fiduciary duty to the Company as well.
154 As well, Mr Guy breached his duty of care to the Company by failing to advise it on satisfactory ways of protecting payment of the balance of the purchase price (paragraph 134 above). On top of that, on the basis of Mr Moses’ evidence, I am satisfied that Mr Guy also failed to advise the Company and Ms Humphrey to obtain independent advice in the circumstances which then pertained.
E Instructions not to Exchange Contracts
155 The plaintiffs allege that Mr Guy exchanged contracts when they had instructed him not to do so [ASOC paragraph 24 (ei)].
156 The plaintiffs concede that Ms Humphrey’s recollection about exactly when she gave this instruction was “not entirely satisfactory” and that it “may well be” that Ms Humphrey told Mr Guy to proceed with the exchange.
157 My assessment of Ms Humphrey’s evidence on this issue was that she was unsure about what happened. On the other hand, Mr Guy was an experienced solicitor and I doubt that he would have been so stupid as to have allowed contracts to be exchanged if Ms Humphrey was telling him not to.
158 It occurs to me that Ms Humphrey may have instructed Ms Lipinstale not to exchange contracts and that it was she who acted in the face of such instructions. However, this was not the plaintiffs’ case and I am not satisfied that they have discharged the onus on this issue.
F Trade Dollars
159 Although the plaintiffs alleged in paragraphs 24 (a), (h) and (i) and of the ASOC that Mr Guy failed to advise or warn them adequately about proceeding with a transaction in which the Company would receive trade dollars, this claim was abandoned at the end of the day (paragraph 49 of counsel’s written submissions). This is understandable because Ms Humphrey was familiar with trade dollars and understood how they worked.
G Causation
160 The Court has found that, if Ms Humphrey had received independent legal advice, contracts would not have been exchanged. The Court has also found that Mr Guy breached his duty of care (as set out in paragraph 150) as a result of which it would have been inevitable that contracts for the sale of the Property would never have been exchanged. As a consequence, the Company would not have lost the Property to the Pogsons.
H Contributory Negligence
161 The third defendant’s submissions on contributory negligence are set out in paragrapha 53 and 54 of counsel’s submissions. They hinge on Ms Humphrey giving Mr Guy instructions to proceed to settlement. The submissions should not be accepted because the Court has found that the Company would not have proceeded to settlement if properly advised by Mr Guy.
I Damages
162 The plaintiffs’ loss, in the circumstances, is the market value of the Property as at the date of settlement, 15 January 1999, since that is the date on which title in the Property was transferred to the Pogsons.
163 The Company led expert evidence from three valuers to establish the market value of the Property. The figures they arrived at were between $270,000 and $312,000.
164 In the case of Mr Kelly, his evidence does not assist the Court in its determination because his approach was based not on what the then current market value of the Property was but what the value of the Property was assuming the highest and best use.
165 Mr Gibson arrived at his valuation by looking at sales of properties at Mudgee and Narromine. In my assessment, these were not comparable sales and so Mr Gibson’s opinion is flawed.
166 Mr Phippen’s valuation is of more assistance, but again, the opinion is based on two presumptions, one, that certain road works would be carried out and secondly, that certain easements would be granted. In my opinion, these presumptions were not justifiable in the circumstances and therefore infect the figure arrived at. As well, Mr Phippen did not sufficiently or accurately identify the comparable sales to which he referred and this casts doubt on the adequacy and reliability of his approach. I therefore do not accept his opinion either.
167 In the circumstances, there is no reason why the Court should not assess the market value of the property at $165,000. This was the amount Mr and Mrs Searle were prepared to pay the Company to purchase the Property from it in August 1998 in an arms length transaction. Mr and Mrs Searle decided not to go ahead in September or October 1998 because the Company wanted them to pay some of its costs. Accordingly, I assess the Company’s damages in the amount of $165,000, being the market value of the Property in January 1999, the Court inferring that there was no real shift in the market between August 1998 and January 1999.
168 The amount of $55,000 should be deducted from the Company’s damages. This represents the amount owed on the mortgage, the discharge of which was handed over at settlement on 15 January 1999: $50,000 was paid on settlement, $4,000 of the deposit had been refunded to the Pogsons earlier and they had used it to discharge the mortgage; the remaining $1,000 of the deposit was kept by the Company.
169 Taking these amounts into account, the amount of damages to be awarded to the Company is reduced to $110,000.
J Failure to Mitigate
170 The Company and Ms Humphrey commenced proceedings against the Pogsons. They were settled on the second day of the hearing, 20 March 2007, on the basis that the plaintiffs and the Pogsons mutually covenanted not to sue each other. The Pogsons agreed to pay the plaintiffs’ costs of the proceedings against them in the sum of $35,000. It seems to me that $35,000 was a reasonable figure for these costs, knowing what I do about these proceedings.
171 There is no reason why the Court should not infer that the Company would have recovered the equivalent of 285,000 trade dollars from the Pogsons. After all, this was the balance of the purchase price that was due by them to the Company. It ought be taken into account.
172 The best evidence is that one trade dollar in 1998-1999 was worth 10 cents in cash. Accordingly, the amount of $28,500 will be deducted from the plaintiffs’ damages, resulting in a figure of $81,500. There will be a Verdict in favour of the Company in this amount.
K Interest
173 The Company lost the Property on 15 January 1999 and has been without it since then. Accordingly, in the exercise of the Court’s discretion the Court awards the Company interest on the amount of $81,500 pursuant to s 100 of the Civil Procedure Act 2000 from 15 January 1999 to date. Interest calculated under the Rules of Court amounts to $65,944. This will be added to the Company’s Verdict.
L Ms Humphrey
174 Ms Humphrey has suffered no real loss. First of all, although Ms Humphrey borrowed $50,000 from Mr Pogson, she lent the money to the Company and there is no reason for the Court not to infer that she will get it back from the Company. Secondly, although Mr Pogson was due to receive an extravagantly high interest rate, the evidence is that Ms Humphrey made no repayments of either principal or interest to Mr Pogson. Thirdly, the Pogsons have covenanted not to sue Ms Humphrey. In the circumstances, though, it is appropriate to award Ms Humphrey nominal damages as she is entitled to a Verdict. I assess those damages at $1.
M Costs
175 On the face of it, the Company is entitled to an order for costs on the ordinary basis. So is Ms Humphrey because it was appropriate for her to be joined as a plaintiff. I will entertain submissions if either of the parties wishes to be heard on this issue.
N Outcome
176 Subject to what I have said about costs, the Court’s order are:
1. Judgment in favour of the First Plaintiff against the Third Defendant in the amount of $147,444.
3. Direct that the exhibits be returned.2. Judgment in favour of the Second Plaintiff against the Third Defendant in the amount of $1.
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