Blewitt v Klekner Trading as Tuggeranong Legal - [2014] ACAT 16

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

BLEWITTv KLEKNER TRADING AS TUGGERANONG LEGAL
(Appeal) [2014] ACAT 16
AA 13/26
Catchwords: APPEAL – CIVIL DISPUTE – exchange of contract to buy unit – appellant’s seeking to be released from the the exchanged contract – Notice to Complete the contract – solicitor’s duty to client in relation to contracts: scope of solicitor’s retainer – steps a reasonable solicitor could take for releasing client from a contract – whether respondent solicitor failed to meet the standard of care towards client – in relation to extrication from contract, failing to proactively act in client’s best interests – damages: difference in cost of fees charged the current solicitor
Cases: Amadio Pty Ltd v Henderson (1998) 81 FCR 149
Cavenham Pty Ltd v Robert Bax & Associates [2011] QSC 348
Lyn Gary Howarth and Christine Joy Howarth v Steve Miotti and Redchip Lawyers [2009] QSC 96
Thornthwaite and the Commissioner for Social Housing in the ACT [2012] ACAT 11

Appeal Tribunal: W.G Stefaniak AM – Appeal President

Ms. J Lennard – Senior Member
Date of Orders:  23 December 2013
Date of Amended Orders:              24 March 2014
Date of Reasons for Decision:      24 March 2014

AUSTRALIAN CAPITAL TERRITORY )

CIVIL AND ADMINISTRATIVE TRIBUNAL ) NO: AA 13/26
XD 13/151

RE:SUSAN BLEWITT
Appellant

AND:LESLIE KLEKNER T/AS TUGGERANONG LEGAL
Respondent

ORDER

Tribunal: W.G Stefaniak AM - Appeal President
Ms J. Lennard – Senior Member

Date of Order: 23 December 2013

The Tribunal Orders that:

Appeal allowed in part.

The respondent is to pay the applicant the sum of $2,903.56 (being damages of $2,441.56 plus filing fee of $462.00).

The respondent is allowed 28 days to pay the $2,903.56.

........................................

W.G Stefaniak AM - Appeal President
For and on behalf of the Tribunal

AUSTRALIAN CAPITAL TERRITORY )

CIVIL AND ADMINISTRATIVE TRIBUNAL ) NO: AA 13/26
XD 13/151

RE:SUSAN BLEWITT
Appellant

AND:LESLIE KLEKNER T/AS TUGGERANONG LEGAL
Respondent

APPEAL TRIBUNAL: W.G Stefaniak AM – Appeal President

Ms J. Lennard – Senior Member

DATE: 24 March 2014

ORDER

The Tribunal orders that:

The orders dated 23 December 2013 are set aside and substituted as follows:

The appeal is allowed in part.

The respondent shall pay the appellant the sum of $2,502.96 within 28 days of the date of this order.

………………………………..
W.G Stefaniak AM Appeal President
For and on behalf of the Tribunal

REASONS FOR DECISION

The appellant Susan Blewitt appealed against a decision of Member Daniel which was made on 13 June 2013. The member dismissed the appellant’s action for damages against the respondent and upheld the respondent’s cross claim against the appellant ordering the appellant to pay to the respondent the sum of $660.00.
The background of the matter is set out below in summary form:
(a)On 28 September 2011, the appellant entered into a contract to purchase a unit at the VUE Apartments in Tuggeranong. The contract was executed and exchanged by the appellant and the sales agent on that day.
(b)The sales agent suggested that the appellant approach the respondent to act on her behalf.
(c)
The appellant telephoned the respondent’s office and later met with

Mr Gary Stilling, a solicitor employed by the respondent.
(d)
The appellant’s appointment with Mr Stilling occurred on

17 October 2011 after the cooling off period allowed by the contract for purchase of the unit.
(e)The appellant indicated to Mr Stilling that she would borrow an amount of approximately $435,000.00, that she understood she had agreed to pay the deposit of $45,000.00 by instalments, that she understood that stamp duty would be in an amount of $18,026.00 to be paid before settlement and that she owned her own home. The evidence before the appeal tribunal was equivocal as to whether the appellant had told Mr Stilling that she had an amount of $350,000.00 equity in that home.
(f)On or about 25 October 2011, the respondent sent a letter to the appellant setting out the terms of the retainer between the parties. The terms indicated that the fee for ‘all usual legal work’ associated with acting on her behalf in relation to the purchase of the unit would be $895.00 plus out-of-pocket expenses and GST; and that any ‘extra work’ would be charged at the rate of $195.00 per hour.
(g)On or about 16 August 2012, the appellant phoned Mr Stilling and left a message advising that she wished to be released from the contract to purchase the unit because she was unable to obtain finance. Email and telephone correspondence continued between the parties: the appellant instructed the respondent to take action to have her released from the contract.
(h)On or about 29 August 2012, Mr Stilling sent a fax to Hill & Rummery, solicitors for the seller. The fax was brief and stated as follows: “My client wishes to be released from this contract without penalty. Would you please seek instructions and advise whether your client will enter into a deed of rescission.”
(i)Hill & Rummery responded by writing the word “No” on the facsimile and sending the annotated fax to the respondent on the same day, 29 August 2012.
(j)Mr Stilling advised the appellant by email dated 30 August 2012 that the solicitors for the sellers had advised that they would not release her from the contract. In that email he advised the appellant that he expected that settlement would occur soon and explained that a failure to complete the contract in time could result in the seller terminating the contract and retaining the deposit already paid, and taking action to recover the balance of the deposit being $22,750.00. In the final paragraph, Mr Stilling stated “I suggest you explore your further options for finance, having been advised by various lenders that they are unable to assist you with the funds required to settle. I recommend you seek to obtain finance is a matter of urgency so as to complete this purchase.”
(k)On or about 11 September 2012, the appellant emailed Mr Stilling indicating that she would seek further legal advice on the issue and offering the opinion that he had not acted ”on my instructions as my solicitor in seeking to have the contract rescinded. Why has this not occurred? You have a duty as a solicitor to do so, not to act on behalf of the seller.”
(l)
On or about 24 September 2012, Hill & Rummery served a Notice to Complete in relation to the purchase of the unit. By email on

24 September 2012, Mr Stilling sent a copy of that Notice to Complete to the appellant and stated “a failure to complete by 9 October 2012 could result in the seller terminating the contract, retaining the deposit you have been paying by instalments and they will also have the right to sue you for the balance of the 10% deposit. Any shortfall in the subsequent sale by the Seller may also be recovered from you”.
(m)
On or about 24 September 2012, the appellant engages the services of

Mr Bede Webster, solicitor. Mr Webster wrote to Hill & Rummery seeking rescission of the contract for the purchase of the unit. In that letter he identified “serious flaws in the contract” and stated that any attempt by the seller to enforce the contract would be resisted and was likely to be unsuccessful. On 28 September 2012, Mr Webster again wrote to Hill & Rummery in relation to the Notice to complete which he asserted was “invalid and of no effect”.
(n)On or about 20 December 2012, the appellant commenced action in the ACAT against the seller. The matter was resolved by the parties entering into a Deed of Mutual Rescission on 25 January 2013.
(o)The appellant asserts that Mr Stilling acted negligently in a number of aspects but importantly that in relation to extricating her from the contract he failed to act diligently in her interests. Mr Webster was able to bring about the deed of mutual rescission, and as a result the appellant has incurred costs of $5,972.33. The appellant alleges that these costs are incurred as a result of the failure by the respondent to fulfil their obligations as solicitors and/or as a result of their negligent action. The appellant claims the amount of $5,972.33 as damages.
In the tribunal below, Miss Blewitt’s application for damages based on negligence was dismissed. The cross claim for outstanding fees of $660 was allowed.
Ms Blewitt appeals against the decision of Member Daniel on a number of grounds. These are summarised as follows:
(a)that the member had made an error of law in finding that the solicitor had not been negligent in relation to:
i.        failing to ensure the initial appointment with the client was during the statutory cooling off period;
ii.       failing to make proper enquiries of the client in relation to the financial viability of the proposed purchase of the unit;
iii.      failing to advise the client to seek financial advice in relation to the purchase of the unit;
iv.      failing to advise client of potential irregularities in the contract for sale;
v.       in relation to the rescission of the contract failing to properly review the terms of the contract for the sale of land on receipt of instructions to seek rescission; failing to identify grounds for rescission of the irregular contract; failing to conduct negotiations with the other party beyond a “single, first communication in regard to a possible rescission”; and failing to ascertain the validity of the purported Notice to Complete served by the seller.
(b)that the member had erred in finding that the respondent had provided advice regarding the cooling off period in relation to the exchanged contract; and
(c)that the conduct of the member had exhibited a reasonable apprehension of bias. .

Principles on appeal

The basic principles on appeal as to ACAT have been set out in the matter of Thornthwaite and the Commissioner for Social Housing in the ACT [2012] ACAT 11 [at 54 – 56]
54. The general rule on appeals is that an appeal court, or an appeal tribunal in this instance, will be reluctant to interfere with the order of a lower court or tribunal unless there is some manifestly obvious error made which, if it was not rectified, will have a substantive bearing - an adverse bearing - on the case - an adverse bearing that would not be in the interests of justice if it were allowed to stand.
55.… if the tribunal below got a few little things wrong but the order fundamentally was sound, then it is not going to be interfered with.
56. So we start from the premise that unless there is something obviously wrong, and it would be unjust not to rectify it, in the decision [of the tribunal below] the appeal tribunal has nothing before it that would justify altering the decisions.
Is the decision of Member Daniel fundamentally sound or is there some manifestly obvious error made which if not rectified will have a substantive bearing, an adverse bearing on the case - an adverse bearing that would not be in the interest of justice that would be allowed to stand.
The appeal tribunal took the view that this would be dealt with on the papers and that there was no requirement for further evidence to be presented.
The appeal tribunal first examined the issue of negligence in two broad categories of events: the initial retainer, early appointments and explanation of the contract; and from the time Ms Blewitt indicated that she wished to avoid the contract.
The Appeal Tribunal determined to hear the matter as a rehearing of the legal issues and therefore the issues relating to apprehended or actual bias by the Tribunal below do not fall to be considered.

The relevant law

The Legal Profession (Solicitors) Rules 2007 state that a practitioner should treat his or her client fairly and in good faith, giving due regard to the client’s position of dependence upon the practitioner, his or her special training and experience and the high degree of trust which a client is entitled to place in a practitioner. Further a practitioner must act honestly, fairly and with competence and diligence in the service of the client.
In Lyn Gary Howarth and Christine Joy Howarth v Steve Miotti and Redchip Lawyers [2009] QSC 96, the Supreme Court of Queensland stated that solicitors owe to their clients “a contractual obligation to perform the retainer to the standard of a reasonable competent legal practitioner and that there is a coextensive duty in tort”. A solicitor must use her or his best endeavours to protect the client’s interest and exercise reasonable care and skill in carrying out by all proper means the client’s instructions in the matter to which the retainer relates.
Howarth v Miotti concerned the purchase of a unit from the plan and in relation to the contract for that purchase, the court stated:
(a)the particular risks of an ‘off the plan’ contract need to be clearly pointed out;
(b)the primary obligation of the solicitor is to go through and explained the terms and conditions of the contract with the clients;
(c)clients who are uneducated or commercially unsophisticated need more explanation of transactions than do commercially sophisticated clients; and
(d)whether consequences of the transactions are potentially serious for a client a greater level of explanation and assistance is required.[1]
[1]at [135 – 141].
In Amadio Pty Ltd v Henderson (1998) 81 FCR 149, it was held that a solicitor has an obligation to advise the client as to the meaning and effect of the contract broadly and of its specific terms. In particular, the duty extends to giving advice on the commercial or economic consequences of the legal effect of the contract. The Tribunal considers that the scope of the duty extends to going through the contract with the client and explaining the salient points and in particular the unusual or onerous terms of the contract.
In Cavenham Pty Ltd v Robert Bax & Associates [2011] QSC 348

(22 November 2011), the court stated that a solicitor is obliged to act generally in the client’s interests in relation to the proposed transactions. Scope of that obligation extended to the solicitor advising the client about the need for legal protection against contingencies which may arise. The proper discharge of the solicitor’s retainer does not depend on the client actively seeking advice. The solicitor is obliged to proactively give the appropriate advice.[2]
[2]at [28]
The respondent owed a duty of care to the appellant. The scope of that duty of care included relevantly an obligation to properly and thoroughly explain the contract to the client, noting, in particular, any unusual or onerous terms of the contract; and to act in the interests of the client by proactively examining the contract and the Notice to Complete and giving appropriate advice in relation to bringing the contract to an end. The law imposes the standard of a reasonably competent solicitor.
The appeal tribunal considers that Mr Stilling failed to meet the relevant standard of care in relation to the initial appointment and explanation of the contract. The tribunal accepts that Mr Stilling adequately explained the basic notion of the contract, and ascertained that the client intended to borrow to finance the purchase. A solicitor’s duty does not include giving advice in relation to the financial wisdom or viability of such a purchase. However, it does extend to providing advice as to the possible consequences of particular clauses of the contract or actions of the client. In this instance the client ought to have been clearly and appropriately advised at the very beginning as to the serious detrimental consequences of failing to complete the contract.
The appeal tribunal is of the view that no damages or loss flowed from the failure by Mr Stilling to adequately explain the contract and its consequences in the initial interview.
The appeal tribunal takes a different view in relation to Mr Stilling’s conduct upon receiving instructions from his client that she wished to be extricated from the contract. On 29 August 2012, Mr Stilling sent a one line facsimile to the seller’s solicitors asking if the appellant could be released from the contract without penalty. On the same day he received a facsimile back from the seller’s solicitors with a” No” written on it, which very clearly indicated that the applicant would not be released from the contract without penalty. In the view of this, the Tribunal is of the view that the action of sending the ‘one-liner’ fax and failing to proactively advocate for and act in his client’s best interests falls far short of the standard of an ordinarily competent solicitor.
A reasonably competent solicitor would have at this time revisited the contract to determine whether there were any defects within the contract or clauses of the contract which would have allowed his client to either rescind the contract or resist enforcement. Rather than ringing up the solicitors for the seller to discuss the matter further, he advised his client that the seller had declined to release her from the contract. He advised her of the potential consequences of not completing the contract and recommended that she explore further options for finance.
There are a number of other emails between the respondent and the appellant up until the 25 September 2012 when the respondent ceases to act for the appellant. From the email traffic it is clear that the appellant could not finance this purchase and was getting increasingly upset and unhappy with Mr Stilling’s work. She was receiving some assistance from a friend in relation to this and there was further correspondence- for example, on 11 September 2012 she emailed Mr Stilling and said she had taken some advice from Mr Waters and that she would be seeking further advice. She further stated that she could not get finance, even for personal loans due to a credit default. She asserted that

Mr Stilling had not acted on her instructions, she asked for a copy of the purchase contract and she was making various attempts to contact the Law Society and “media including ‘A Current Affair’”.
There were further emails between the appellant and the respondent including the receipt of the Notice to Complete. At this stage around 24 or 25 September, the appellant had contacted and was actively seeking the assistance of Bede Webster and on 25 September Mr Stilling ceased to act for the Appellant.
Mr Webster took the matter over on 24 September and obtained a copy of the contract and other documentation and commenced negotiations and ultimately proceedings in ACAT in order to extricate the appellant from the contract.
The Tribunal is at a loss to understand why Mr Stilling, a solicitor of 20 plus years of experience did not pursue other avenues to achieve the end of the contract – he could have simply picked up the phone and spoken to the seller’s solicitors and made it clear that the client was unable to obtain finance, he could have examined the contract terms, the execution of the contract by the seller and the Notice to Complete – each of which was argued by Mr Webster to be irregular or invalid.
It is also apparent during the 29 August to 25 September period that Mr Stilling did not seem to appreciate the problems with the Notice to Complete and any issues around that. He did not seem to appreciate issues in relation to the contract and the fact that it had been signed by only 2 out of the 3 persons who needed to sign it. There was, in the Tribunal’s view, ample scope for sensible discussions with Hill & Rummery that could well have set the ball in train for what ultimately occurred in January 2013 after Mr Webster had taken over the matter.
Mr Stilling appears to have assumed the contract was sound and without defect and merely pointed out the penalties to his client without taking what were fairly obvious steps.

Mr Stilling, in breach of his duty to his client, failed to take the steps required of an ordinarily competent solicitor to advocate for his client’s interests and proactively assist her in being extricated from the contract. Those steps were simply to read the contract, to read the notice to complete to ascertain whether there were any defects or technical areas which would assist his client and to negotiate with the sellers’ solicitor to explain that any attempt of enforcement in the contract would be resisted, and that the client was not able to finance the purchase. Mr Stilling still could have followed that up with a telephone conversation and with a more detailed letter. He could, and indeed should, have looked at the contract again and gone through it, and actually ascertained what he could use in that “contract” to get his client out of the contract.
The Tribunal is concerned that he did not think to go back through the contact. If a seller will not agree to repudiation of the contract and will not agree to rescission, surely the first step would be to look at the contract to see if there was anything in it that had not been done that should have been done or that would make it difficult for a seller to insist on the contract being enforced. That clearly did not occur.
The Tribunal is satisfied that not only should 29 August 2012 be a cut-off date as to when Mr Stilling is entitled to any legal fees but also the date when the appellant could claim damages in terms of legal fees payable to another solicitor to advocate on her behalf and terminate the contract. Whilst it is the Tribunal’s view that Mr Webster is entitled to fees charged for reading himself into the brief, after he had done that it is the Tribunal’s view that the additional fees incurred then would simply be fees incurred by a competent solicitor trying to get his client out of the predicament. They would be fees which would have to be paid to Mr Stilling, the respondent solicitor, had he continued on and done the work properly.
The respondent’s fees are only charged out at the rate of $195.00 an hour plus GST, a total of $214.50 inclusive. Mr Webster’s fees GST Inclusive are $352.00 a difference of $137.50. Had the respondent’s solicitor charged out at the same rate he would not be liable in the Tribunal’s view for paying those fees. As he charged at a lesser rate and as the appellant quite correctly, in the Tribunal’s view, sought advice from another solicitor and changed solicitors, the respondent is responsible for the difference, being $137.50 per hour.
The Tribunal determines that the appellant is entitled to damages in relation to the cost incurred by Mr Webster in familiarising himself with the contract and the Notice to Complete; the difference in cost as a result of the differing hourly rates charged by Mr Stilling and Mr Webster in relation to that work which

Mr Webster undertook to finalise the matter between the parties.
The tribunal has looked at the schedule of the tax invoice tendered by the appellant and has decided that the first 5 items are chargeable by Mr Webster in relation to bringing himself up to speed in the matter and putting himself into a position the respondent’s solicitor was in prior to further action being taken on behalf of his client in relation to the contract and further contact with Hill & Rummery . The total cost is $1261.33. Those five items are
·24 September 2012 - 30 minutes perusing the contract sale $176.00;
·24 September 2012 - 1 hour conference with the client: $352.00;
·25 September 2012 - 1 ½ Hrs Review of contract for purchase of land $528.00;
·25 September 2012 - 15 minutes, draft letter to Hill & Rummery, re-notice of readiness to complete and send. $88.00;
·25 September 2012 - 20 minutes, email exchange with Gary Stilling, Tuggeranong Legal read documents on file $117.33.
In addition to this initial work, after 25 September, Mr Webster spent some 13.83 hours dealing with this matter until a satisfactory resolution was attained. The difference between $320.00 plus GST (352.00 per hour and $195.00 plus GST) and $214.50 an hour is $137.50. The Tribunal has determined that damages in relation to this work amounts to $1901.63.
Thus, damages in the amount of $3162.96 are to be paid by the respondent to the appellant.
Member Daniel awarded $660.00 being the respondent’s bill sent to the appellant on 27 September 2012, which stated “To our fees of acting for you on proposed purchase being costs incurred from taking instructions on 17 October 2011 to 25 September 2012 together with all incidental matters, correspondence and attendances, our fees reduce considering over 4 hours spent on the matter” at $660.00 ($600.00 plus $60.00) GST.
The appeal tribunal considers at least 2 hours’ work would have been done in 2011 and then prior to the 29 August 2012 at least another 2 hours’ work would have been done by the respondent. An amount of $660.00 is an appropriate charge for that work.
Accordingly, that part of the member’s decision is not interfered with.
One final point that the tribunal would like to make in this matter is that this is another instance of a standard contract for sale of a unit being amended by a document which is even larger than the original contract. The final “contract” was difficult to read and understand, contained errors and internal inconsistencies. The form and content of the contract may contribute to the lack of understanding of the terms and conditions and consequences of non-compliance, by purchasers and their advisers. In situations where the amendments are so extensive as to amount to a contract which is substantially different from the standard conveyancing contract, there is a serious risk of error, lack of understanding and inconsistency and the Tribunal recommends that a separate contract should be drawn up by the sellers. It should be a legal requirement, and as a matter of general fairness and consumer protection a new contract should be drawn up. The Tribunal commends that approach to the Attorney General.
Accordingly, $660.00 needs to be deducted from the $3,162.96 damages due to the appellant, so that a net amount of $2,502.96 is payable by the respondent to the appellant.
The Appeals Tribunal notes that errors were made in calculation of the damages amount, and also that the filing fee was included in the amount to be paid by the respondent. The appellant did not pay a filing fee. The Appeals Tribunal therefore, pursuant to s 56 of the ACAT Act sets aside the original orders and substitutes the orders below.
The Appeals Tribunal makes the following orders:
(i)The appeal is allowed in part
(ii)The respondent shall pay the appellant damages in the sum of $2502.96 within 28 days of the date of this order.
………………………………..
W.G Stefaniak AM – Appeal President
For and on behalf of the Tribunal

PUBLICATION DETAILS

FILE NUMBER:	AA 13/14
PARTIES, APPELLANT:	Susan Blewitt
PARTIES, RESPONDENT:	Leslie Klekner Trading as Tuggeranong Legal
SOLICITORS FOR APPELLANT	B. Webster
SOLICITORS FOR RESPONDENT	G. Stilling, Tuggeranong Legal
TRIBUNAL MEMBERS:
DATES OF HEARING:
PLACE OF HEARING:	24 & 25 October 2013 23 December 2013