Callachor and Gillroy trading as Callachor Gillroy Solicitors v Black

[2000] NSWCA 347

CITATION:	Callachor and Gillroy trading as Callachor Gillroy Solicitors v Black and Anor [2000] NSWCA 347
FILE NUMBER(S):	CA 40646/99
HEARING DATE(S):	27 November 2000
JUDGMENT DATE:	27 November 2000
PARTIES :	Julian Callachor and Robert Gillroy trading as Callachor Gillroy Solicitors (Appellants) Louise Black and Steven Woods (Respondents)
JUDGMENT OF:	Mason P at 59; Handley JA at 61; Heydon JA at 1

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	36/96
LOWER COURT JUDICIAL OFFICER :	Christie QC DCJ

COUNSEL:	D Fagan SC/G Curtin/G Gemmell (Appellants) P Maiden (Respondents)
SOLICITORS:	Colin Biggers & Paisley (Appellants) Falvey Byrnes & Associates (Respondents)
CASES CITED:	East v Maurer [1991] 2 All ER 733 Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 Goody v Baring [1956] 1 WLR 448 Moody v Cox [1917] 2 Ch 71
DECISION:	See paragraph 58.

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40646/99
DC 36/96

MASON P
HANDLEY JA
HEYDON JA

27 November 2000

Julian CALLACHOR and ROBERT GILLROY
t/as CALLACHOR GILLROY SOLICITORS
v Louise BLACK and STEVEN WOODS


JUDGMENT

1    HEYDON JA:

Background
This is an appeal from a verdict and judgment by Christie QC DCJ for the plaintiffs against the defendants in the sum of $182,000 and costs. The appeal is brought by the third defendants, a firm of solicitors.

2    The first plaintiff, Louise Black, was married to a police officer, Graeme Black. She and her husband were friendly with the second plaintiff, Steven Woods. Mr Black knew Mr and Mrs Ashby, the second defendants. The Ashbys were directors of the first defendant, Westmac Pty Limited, which operated a restaurant called the “Garrison Restaurant” in Port Macquarie in leased premises.

3    The plaintiffs, by contracts exchanged on 30 May 1994, agreed to purchase from the first defendant the business conducted under the name “Garrison Restaurant” for $45,000. Mr Callachor, the third defendant, was acting for both vendor and purchasers. On 1 June 1994 the plaintiffs received a letter from Mr Callachor stating that on settlement $30,000 of the purchase price was to be paid to the vendor’s landlord for arrears of rent. The arrears were in fact greater than that figure, namely $46,102.26. The cheque was provided and the sale was completed on that date.

4    Apart from the occasional function, the restaurant was ill-attended under its new owners and closed in February 1995.

5    In August 1996 the plaintiffs caused a Statement of Claim to be served on the defendants. This was the first occasion on which any complaint was made to any of the defendants.

6    Against the first and second defendants, the allegations in the Statement of Claim were of representations which were unfulfilled or alternatively warranties which were breached as to the profits and turnover of the business.

7    The reasons for judgment of the learned trial judge do not contain many specific findings, but they implicitly accept the case which the plaintiffs propounded against the first and second defendants, and indeed he stated that the second defendants had behaved fraudulently. The first and second defendants have not appealed against the orders so far as the orders affect them and have not appeared as respondents to this appeal.

8    Against the third defendant, the plaintiffs alleged in the Statement of Claim that Mr Callachor, whose firm carried on in conjunction with its legal practice a business known as Julian A Callachor Taxation & Accounting Services, had constructive or actual knowledge of the first defendant’s financial position and of the fact that it owed more than $30,000 in back rent. It was alleged that it was an implied term of the retainer between the plaintiffs and Mr Callachor that Mr Callachor would act in the best interests of the plaintiffs and disclose “all information relevant to” the plaintiffs’ decision to buy the business. It was alleged that Mr Callachor breached the retainer by failing to disclose to the plaintiffs the financial position of the first defendant, failing to give advice about the deletion of clause 26 of the contract of sale, and failing to advise at all about the terms of the agreement for sale. (The Agreement for Sale of Business was in the standard form, 1989 edition, approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. Clause 26, which was deleted, provided:

“The Vendors warrant that the gross takings of the business for the period set out in V(b) of the Particulars were not less than the amount set out in V(a) of the Particulars.”

Special Condition 5 provided:

“The Purchasers acknowledge that they have entered into this Contract after making their own independent inspection and investigation of the business and without relying in any way on any statement or representation which may have been made by the Vendor or any person on its behalf.”)

9    The trial judge acquitted Mr Callachor of any knowing involvement in the fraud of the second defendants (Red 28H, 32N and 33F). He also appeared to abstain from finding any breach of duty in not giving general advice about the financial position of the first defendant (Red 31K and 32T). He did, however, reject various aspects of Mr Callachor’s evidence. And he also found that Mr Callachor was in breach of a duty to disclose what he knew of the rental arrears of the first defendant (Red 32T-W, 33J and 35M-P). He found that once he learned of the first defendant’s rental arrears, he should have sent the plaintiffs to new solicitors and told them of the rental arrears. He described Mr Callachor’s non-disclosure as being “negligence”, “wilful neglect” and based on “an overt decision to withhold knowledge which he knew struck at the very heart or the legitimacy of the entire transaction” (Red 40E-T).

10    The trial judge appears not to have made any explicit findings adverse to Mr Callachor in relation to the form of the contract of sale, beyond the removal of clause 26 and the insertion of special condition 5. On that particular matter, he found that Mr Callachor “never advised, or sought to advise”, the plaintiffs (Red 31Q and 32P). (He did not explain why a failure to advise on the insertion of special condition 5 was important in view of the fact that clause 20 of the standard form provided:

The Purchasers acknowledge that, in entering into this agreement, they have not relied upon any … representation, warranty or condition made or given by the Vendors or any one on their behalf in respect of the subject matter of this agreement, other than those that are expressly herein contained” (Blue 2/193P).)

11    The Notice of Appeal, grounds 9-12, in effect question whether there was any finding that the deletion of clause 26 and the insertion of special condition 5 caused any loss to the plaintiffs. The appellant’s written submissions, para 10.4, asserted that no finding was made. The first respondents’ written submissions, para 19, said that they did not “dispute the Appellant’s Summary of His Honour’s finding set out in paragraphs 8-10 of the Outline of Submissions”. Those written submissions did not contend that there was any such finding.

12    The defences of Mr Callachor at the trial in relation to the issue on which he lost, namely a non-disclosure of rental arrears, were:

(a) he had no duty to disclose what he knew: the trial judge rejected this contention;

(b) the plaintiffs were not interested in the financial position of the first defendant because they were going to change the nature of the restaurant business to what the trial judge called a “lingerie type bar restaurant”: the trial judge accepted that there was such a plan, but denied that that meant the plaintiffs would not have been concerned about the rental arrears, and accepted evidence of Mrs Black that had she known that the arrears were $46,102.26, she would not have entered the contract (Red 27S-Y and 35R);

(c) he told the plaintiffs that there were arrears of rent which would be paid out on settlement: the trial judge rejected his evidence and accepted the evidence to the contrary given by Mrs Black and Mr Woods (Red 35L-P and 37G);

(d) the failure of the plaintiffs to complain on learning of the $30,000 arrears, and the continued employment of Mrs Ashby as an adviser after completion, pointed to the immateriality of the first defendant’s financial position to them: the trial judge saw no significance in this, for reasons which are not clear but appear to rest on the naivety of the plaintiffs (Red 30B-F, 32B-H and 38T-W).

13    On the appeal the third defendants reiterated these defences.

Chronology

14    According to the respondents, there is some importance in establishing the chronology of events with precision. In particular the date of what was called the “second meeting” between Mr Callachor, Mr Black, Mrs Black and Mr Woods was important. The background to the “second meeting” was as follows.

15    In late February or March 1994 Mr Ashby rang Mr Black and discussed a possible sale of the relevant business (Red 20T-21F and 21K).

16    In March 1994 the plaintiffs and the second defendants met (Red 21G-J). (So the trial judge found: in fact Mr Woods was not present, according to Mr Callachor (Black 2/283T), Mrs Black (Black 1/19M-W) and Mr Black (Black 1/74M-76F); Mr Woods did not suggest otherwise.) The plaintiffs perused some books of account (Red 21V). The plaintiffs contended that the representations adducing the contract were made on this occasion (Red 22B-Q).

17    In April 1994 Mr Black, Mrs Black, Mr Woods and the Ashbys met again (Red 24N).

18    Also in April 1994 Mr Black, Mrs Black, Mr Woods and Mr Callachor met, in the presence of Mr Ashby (Red 24P). This was the “first meeting”.

19    After the first meeting in April 1994, between mid April and 25-26 May, one of the Ashbys told Mr Callachor that there was a “fair amount” (Black 2/284N) or a “substantial amount” (288U) or a “large amount” (289V) of rent outstanding on the premises.

20    On or about 25 or 26 May 1994 Mr Callachor learned that the first defendant was in arrears of rent to the extent of $46,102.26.

21    The trial judge made the following findings about the “second meeting” (Red 25N-R):

“the plaintiffs, to whom I again compendiously refer as Mr and Mrs Black and Mr Woods, returned to Port Macquarie on or about 24 May 1994 and it is important to note that that date was a week before the exchange of contracts was achieved and consequently before the contents of exhibit B were formally binding upon the plaintiffs.”

Exhibit B was the contract for the sale of business.

22    Mr Callachor gave evidence that the “second meeting” took place towards the end of May 1994 (Black 2/284H and P). He saw Mr Black “two days later, it was the 1 June” (Black 2/286M). Mr Black also gave evidence that the second meeting was on Monday 30 May 1994 (Black 1/77V). At the hearing of the appeal the appellants accepted that the correct date was 30 May 1994.

23    The significance, if any, of the dating is that Mr Callachor submitted to this Court that he only learned that the first defendant was in arrears of rent to the extent of $46,102.26 on or about 25 or 26 May 1994 (Black 2/289K). For my part I am unable to see that it matters whether Mr Callachor learned of the full extent of the rental arrears just before or just after the second meeting. If he had a duty to pass that information on, that duty applied whether a convenient opportunity to do so arose at the second meeting or not; if it did not so arise, the duty would have required him to inform the second defendants before exchange or, if he had not done so earlier, before settlement.

24    On 30 May 1994 contracts were exchanged.

25    On 1 June 1994 Mr Callachor informed the plaintiffs that on settlement a cheque for $30,000 was to be provided in favour of the first defendant’s landlord. It was provided and the transaction was completed.

Was the matter of arrears of rent “equivocal”?

26    Mr Callachor submitted that the fact that there were arrears of rent “was entirely equivocal as to the financial condition of the business being sold.” It was submitted that the mere fact that the first defendant had not paid its rent up to date did not establish that it could not do so, let alone that any inability to pay arose from the unprofitability of the restaurant business. It was suggested that the business might have been highly profitable, and that the Ashbys might have taken substantial dividends from the first defendant in preference to paying the landlord. Hence it was submitted that even if Mr Callachor had assumed responsibility for giving advice on the financial condition of the business, it would not have been a breach of his duty to refrain from passing on what he knew about the arrears of rent.

27    I would reject this submission. Putting on one side any particular feature of the dealings between Mr Callachor and the plaintiffs, or amongst the plaintiffs themselves, which might make the question of arrears of rent unimportant, failure by the first defendant to pay $46,102.26 in rental - which, since the rental was $2,058 per month, was over 22 months’ arrears - would raise at least a question over the viability of the restaurant, whether operated as the first and second defendants had been operating it, or operated as the plaintiffs intended to operate it. On Mr Callachor’s own case, he regarded the business as not particularly well run, and considered that Mr Ashby had a drinking problem which had contributed to its lack of success (Black 2/284Q-S). This state of mind on the part of Mr Callachor would exclude any innocent explanation for the $46,102.26 arrears - if deliberate non-payment of the landlord could ever be “innocent” - and points strongly against that matter being equivocal. Whether or not it was equivocal was at least a matter in relation to which the plaintiffs were entitled to make up their own minds in the light of all the facts as known to their legal adviser.

Was there a duty to disclose any financial information? Was it breached?

28    The third defendants in their submissions to this Court noted that the trial judge accepted the evidence of Mrs Black as to the terms of the oral retainer of Mr Callachor (Red 34E). Her evidence was to the effect that Mr Callachor was retained to “represent” the plaintiffs in the proposed purchase of the business, to draw a partnership agreement between the plaintiffs, and to advise the plaintiffs whether the first defendant’s lease should be assigned or a new lease negotiated. It was submitted that Mr Callachor had not “assumed any responsibility to advise with respect to the financial condition of the business or the prudence of the purchase”. It was also submitted that the plaintiffs had expressly limited the retainer by expressly stating that they were not concerned with the financial condition of the business, and thereby had negated any obligation on Mr Callachor’s part to disclose financial information.

29    The evidence supporting the proposition that the plaintiffs had expressly said they were not concerned with the financial condition of the business is as follows.

(a) Mr Callachor said (Black 2/285B) that at the meeting in his office on 30 May 1994, the second meeting, in the presence of Mr and Mrs Black and Mr Woods, Mr Black said “We are not particularly concerned about his books and his figures”. Mr Callachor said he asked “Have you had a look at the books of account and the figures for the business?”. Mr Black replied “Yes we’ve had a look at them”. Mr Black “reiterated that he was not concerned about the figures”.

(b) Ms Vassallo, who was an accountant employed by the third defendants from May 1992 until May 1996 (Black 2/320T), and who was the only primary witness without a financial interest in the action, said that on an occasion in the first half of 1994 she heard Mr Black say to Mr Callachor in the hall at the third defendants’ offices that “he was not interested in the books of the business because he was changing the whole place anyway” (Black 2/321K). While this was not direct corroboration of Mr Callachor’s evidence of what was said in his office, it was some support for the likelihood of that having taken place.

(c) Mr Black, Mrs Black and Mr Woods, on learning of the fact that a cheque for $30,000 needed to be made out to the first defendant’s landlord to pay rent arrears, did not show any surprise or make any complaint to Mr Callachor, nor was any complaint made to Mrs Ashby, who continued to work in the business after 1 June 1994 until November 1994. See Black 1/37K-X (Mrs Black); 77R-T and 81J-84C (Mr Black); and 122S-124U (Mr Woods).

(d) Ms Vassallo’s evidence as to the reason given by Mr Black for lack of concern about the books, namely a planned change in the nature of the restaurant, is corroborated by the fact that that change was intended and was put into effect.

30    On the other hand, Mr Callachor’s evidence about the plaintiffs telling him they were not concerned with the financial condition of the business is contradicted by the following.

(a) The conversation in question was denied by Mrs Black (Black 1/61H-J).

(b) The conversation in question was denied by Mr Black (Black 1/106J-K).

(c) The conversation in question was denied by Mr Woods (Black 1/132M).

(d) Each of these three witnesses gave explanations for their failure to complain on 1 June 1994 or later about the failure to disclose the arrears of rent.

31    If the matter is looked at from Mr Callachor’s point of view, he had given evidence, on which he was never shaken, and which, at least on the printed page, appears prima facie credible. He was partly corroborated by Ms Vassallo and partly corroborated by the objective circumstance of the planned change in the restaurant. Further, the absence of complaint by the plaintiffs was prima facie an admission by conduct on the part of the plaintiffs supporting his case. If the matter is looked at from the plaintiffs’ point of view, they had given mutually corroborative evidence, and had offered some explanations for their failure to complain.

32    The issue before the trial judge was not, in all the circumstances, an easy one. It was further complicated by the fact that finding for the plaintiffs might involve disbelieving a solicitor, and finding for Mr Callachor might involve disbelieving a serving police officer, namely Mr Black.

33    The factual dispute was sharpened by the circumstance that the trial judge rejected the evidence of Mr Callachor to the effect that he had told the plaintiffs that the business was run down by reason of Mr Ashby’s alcoholism and that there were some arrears of rental (Red 28T-29B, 31M-P, 32D-W and 35M).

34    What findings, then, did the trial judge make in order to resolve the conflict on the question of whether the plaintiffs said they were not concerned with the financial condition of the business?

35    The trial judge set out Mrs Black’s denial that Mr Black said he was not concerned about the books (Red 34W). Before doing so, the trial judge described the questions he proceeded to quote as “presumably the nub of Mr Callachor’s case” because those were questions put by Mr Callachor’s counsel in cross-examination.

36    The trial judge then set out other parts of the evidence of Mrs Black, parts of the evidence of Mr Black and part of the evidence of Mr Woods, none of which bore directly on the relevant part of the controversial conversation. He did not set out the parts which did or the relevant parts of Mr Callachor’s evidence or the relevant part of Ms Vassallo’s evidence. He then said (Red 37H-K):

“From the above matters, and without dealing with the evidence chapter and verse, it would be apparent that I am of the very clear view that the plaintiffs ought succeed in this claim against all of the defendants and there will be a verdict for the plaintiff against all of the defendants.”

Earlier he had said (Red 33I-N):

“I remain totally unconvinced that Mr Callachor was under no duty to disclose to the purchasers what he knew of the vendors rental arrears situation. I find it surprising and indeed on one view of it astounding that the defendant Callachor or those standing behind him would even attempt to persuade a court of the validity of such a situation.”

The trial judge said that he accepted the evidence of Mr Black, Mrs Black and Mr Woods as to their failure to complain (Red 38K-W), apparently referring back to Red 30B-F and 32B-H.

37    In my opinion, the trial judge has failed to make any express finding on whether or not the crucial statement was made by Mr Black about not being concerned with books and figures. The issue was potentially too important to be made the subject of an implicit finding if that was what was intended by the trial judge’s quotation of Mrs Black’s denial at Red 34W. Even if that was an implicit finding no reasons were given for preferring Mr Black, Mrs Black and Mr Woods to Mr Callachor. No reference whatever was made to Ms Vassallo’s evidence (she, unlike the other four witnesses, had nothing to lose). Nor were reasons given for accepting the explanations offered on behalf of the plaintiffs for non-complaint except to some extent by cross-reference.

38    The attacks made by Mr Callachor on this part of the trial judge’s reasoning were matched by similar attacks on his preference for the evidence given by the plaintiffs’ witnesses over that given by Mr Callachor on whether any disclosure of the existence of arrears of rent was made in the same conversation. That is, it was said that no reasons were given; and that there was no attempt to estimate the probabilities or to assess the utility of Ms Vassallo’s evidence or to analyse credibility by reference to demeanour.

39    Mr Callachor submitted, as part of his general arguments on this part of the case, that either the plaintiffs had analysed the defendants’ books of account or they had not. If they had analysed them they would have noticed on pages 74 and 90 of the relevant exhibit substantial arrears of rent outstanding; the conclusion would follow that support was given to the statement of Mr Black reported to the court by Mr Callachor that they were not concerned with the figures. If on the other hand they had not examined the books, the same conclusion would follow. The force of the first limb of this argument is reduced by Mr Ashby’s evidence that the books were not fully written up by the time they were shown to the plaintiffs (Black 2/168D-L and 180N-181E). They were complete for the period 1991-1992, but rent in that period was shown as having been fully paid.

40    In relation to the appellants’ arguments of a factual character in relation to these points, some attention was paid in oral argument to the question of whether the plaintiffs realised before settlement that the $30,000 bank cheque was required for rental arrears as distinct from realising that after it had been supplied. If it were necessary to decide this question, in my opinion, on the probabilities the plaintiffs would have appreciated this before settlement.

41    Some time was also taken in argument in debating whether, if the trial judge was correct in accepting the plaintiffs’ evidence about being shocked, their explanations for not protesting to the first and second defendants or to Mr Callachor should have been accepted. The primary approach of Mr Fagan SC, who appeared for the appellants, was that their non-complaint showed that they were not shocked, and they were not shocked because of Mr Callachor’s earlier disclosure that there were some arrears and also because they were not concerned about the vendors books and figures.

42    Irrespective of how unsatisfactory or satisfactory the trial judge’s fact finding was, or his reasoning was, and even if the third defendants’ case is taken at its highest, in my opinion the supposed errors of the trial judge were immaterial. That is so because even if the trial judge had accepted Mr Callachor’s account of the 30 May 1994 conversation, Mr Callachor would still have been in breach of his duty to the plaintiffs.

43    Just before the time when contracts were exchanged on 30 May, Mr Callachor knew that the amount owed for arrears of rent was $46,102.26. Mr Callachor must have realised that the business was running at a loss because of his knowledge of the arrears and because of his own perception as to the incompetence with which it was being run. Mr Callachor must have suspected that the landlord would never be paid any part of those arrears by the first or second defendants unless a purchaser was found for the business. Just after exchange, if not earlier, Mr Callachor became aware that it was going to be necessary for him to participate in negotiating on behalf of the first two defendants a transaction which came to be embodied in a Deed of Loan dated 31 May 1994. Under that document the landlord agreed to surrender and bring to an end the existing lease over the premises in return for a bank cheque for $30,000 and a promise to pay the balance of $16,106,26 either when the second defendants sold their house or twelve months after completion, whichever was earlier.

44    Mr Callachor gave evidence (Black 2/288W-289G) that he wrote to the letting agents who told him that a new lease was desired; that he wrote back requesting a lease for three years plus two options to extend for three years at a certain rental; that the landlord’s agent wrote back to say he was referring the inquiry to the landlord’s solicitors; and that the landlord’s solicitors wrote to Mr Callachor including what was described as documentation relating to payment of the arrears of rent out of the proceeds of settlement.

45    This evidence indicates the extent of Mr Callachor’s familiarity with the factual difficulties arising out of the transaction and was knowledge which he acquired because he was acting for both parties, both vendor and purchaser, on the sale of the business. Mr Callachor must have appreciated that without the bank cheque to be provided under the Deed of Loan the sale would not proceed and the grant of the new lease would not proceed either. Mr Callachor must also have known that his clients were having to pay a higher rent to the landlord under the new lease than they were paying under the old. That was a price which unknown to them was being extracted from them in order to facilitate the partial extrication of the landlord from its difficulties. Finally, Mr Callachor must have known that he had, by removing cl 26 without any express instructions to do so, weakened the position of the plaintiffs if the transaction turned out badly.

46    In the circumstances, even if the conversation of 30 May 1994 took place in the terms described in Mr Callachor’s evidence in chief, that is that he had revealed there were arrears of rent and that he was told that the plaintiffs were not particularly concerned about the vendor’s books and figures, that would not either have cut down the duty of Mr Callachor to report what he knew or have constituted a fulfilment of that duty. To say “there are some arrears of rent” is not to say $46,102.26 has accumulated over twenty-two months, nor is it to say that those arrears are a complete obstacle to the surrender of the old lease and the grant of a new lease. To speak of “some arrears” to be paid on settlement is not to go beyond or far beyond relatively trivial sums habitually adjusted on settlement such as rates. To be told that the plaintiffs were not particularly concerned about books and figures would not, in my opinion, absolve Mr Callachor from revealing the dramatic news he received about the quantum of the arrears on 25 or 26 May. It was incumbent on Mr Callachor to give the plaintiffs a further opportunity to consider how far they wanted to be concerned about the books in view of this revelation of the financial history of the business.

47    The essential problem was that Mr Callachor was acting for both sides. He conceded that he would have made disclosure of the full arrears had he been acting only for the plaintiffs (Black 2/307S-Y). His non-disclosure was caused by his fulfilment of his duty to the vendors but it immediately put him in breach of duty to the purchasers.

Causation

48    The appellants contended that the trial judge’s finding that the plaintiffs would not have proceeded if they had known of the rental arrears was wrong. Much of the material relevant to this ground has already been referred to, namely the impending change in the nature of the restaurant, the alleged lack of reliance on the vendor’s books and figures and the lack of protest when the plaintiffs learned that they had to provide a cheque for $30,000 in order to pay arrears of rent. The finding attacked was a finding which did not turn directly on a rejection of Mr Callachor and was open to the trial judge even if Mr Callachor’s version of the 30 May 1994 conversation had been accepted. Further the real issue is perhaps one even harder for the appellants to succeed on than the issue posed by the trial judge. The real issue is whether the transaction would have proceeded if Mr Callachor had fully carried out his duty to the plaintiffs by explaining the significance of the arrears and the way in which discharge of the arrears was to be effected in relation to the landlord’s assent to the transaction. If there had been a performance of his duty by Mr Callachor in that respect it appears highly likely that the transaction would not have proceeded, at least in the form which it took.

49    Although the trial judge gives little reasoning in support of his conclusions, the reasons propounded by the plaintiffs which the trial judge accepted were not implausible. The evidence threw up a triable issue on which the third defendants could have won at trial and on which they could equally have lost. In fact they lost. The issue is one on which in the nature of things it is hard to succeed on an appeal.

Damages

50    One head of damages allowed by the trial judge was put thus (Red 41U-V): “Potential loss of income and interest allowing significantly for exigencies I allow a global sum $25,000”.

51    Mr Callachor put the following submission:

“There was no basis in the evidence for the item ‘Potential loss of income and interest ... $25,000’. This item was in the nature of expectation damages, which might have been appropriate to the causes of action against the Ashbys and WestMac but was not appropriate having regard to the basis of liability found against the appellants.”

52    Mr Callachor also submitted that the trial judge had not advanced any reasoning in support of his conclusion. There is some force in that criticism.

53    Mr Maiden for the respondents took the court to Blue 2/212T-213H, which is part of the evidence of an accountant called by the plaintiffs:

“Black and Woods can also, in my opinion, rightly claim for the loss of opportunity represented by them not having the funds they used in purchasing the business for other purposes. My calculations are based on a closed period from 1st June, 1994 to 31st December 1998. During that period an amount of $57,640 representing capital contributed to this venture by Black & Woods, earned no income. At a modest earning rate of 6%, an amount of $17,312 interest could have been earned had that money been invested. In other words an opportunity loss has resulted.
During the period 1st June 1994 when the business commenced, to the end of January 1995 when the partners were forced to walk away from the business, there is an eight month period where no income was earned by the two principals of the business. Calculated at below the basic wage of $400 per week for a 32 week period a figure of $25,600 forgone income in the form of wages should, I believe, represent part of this claim.”

The 32 weeks referred to is the period June 1994 to February 1995 during which the plaintiffs ran the restaurant before closing it.

54    At Blue 2/213L-M appears the following: “Opportunity losses including foregone wages and unearned income on amounts invested $42,912”. The sum of $17,312 and $25,600 is $42,912.

55    So far as the trial judge selected a figure for lost wages the reasoning appears sound: see Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 13 and East v Maurer [1991] 2 All ER 733. But for the wrong the plaintiffs would have been able to utilise their earning capacity which they devoted to the failing restaurant in the labour market generally. I have considerable doubts, however, as to the legitimacy of taking into account the figure of $17,312 for interest, but so apparently did the trial judge since he reduced the total of $42,912 to $25,000.

56    In argument some attention was devoted to the question of whether there had been a double counting on interest. The query is provoked by the trial judge’s reference to the word “interest”, at Red 41U, and to the fact that he awarded five years of interest at six percent per annum on the losses which he had already assessed (Red 42F).

57    To give six percent interest from 1994 onwards for the wage element for which the trial judge appears to have been compensating is not a patent doubling up of interest to any significant extent. To the extent there is any doubling up, six percent is so low a figure that the outcome is not unjust to the third defendants. In the circumstances no appealable error in relation to the $25,000 item complained of has been established.

Orders

58    I would propose the following orders:
(1) That the appeal be dismissed.
(2) That the appellants pay the costs of the first respondents.

59    MASON P: I agree. Since judgment has been given extempore the direction to prepare proper indices of the black and blue appeal books may be rescinded. Several key exhibits were not included in the blue book. Neither the blue book nor the black book contain an index as required by Part 51 rules 34 and 35. These are not mere technical requirements. The absence of ready access to the oral and written evidence has prolonged the hearing of this appeal as well as made it more taxing for both bench and bar than it otherwise would have been.

60    One should always hesitate before engaging in critical obiter dicta. Since however I think it likely that the appellants are represented by solicitors retained by LawCover I have thought it appropriate to say what I have said to indicate that had the costs not followed the event I would have been minded to have ordered that there should be no costs with reference to the preparation of the appeal books. I also would hope that steps may be taken to ensure that the rules are complied with in the future in this regard.

61    HANDLEY JA: I agree with the reasons for judgment that have been delivered by Heydon JA and I would also respectfully adopt the comments that have fallen from the President. I will only seek to add for myself that in 1917 Scrutton LJ said in Moody v Cox [1917] 2 Ch 71 at 91:

“It may be that a solicitor who tries to act for both parties puts himself in such a position that he must be liable to one or the other whatever he does...it would be his fault for mixing himself up with the transaction in which he has two entirely inconsistent interests and solicitors who try to act for both vendors and purchasers must appreciate that they run a very serious risk of liability to one or the other owing to the duties and obligations which such curious relation puts upon them”.

62    In 1956 Danckwerts J quoted those comments of Scrutton LJ in Goody v Baring [1956] 1 WLR 448 at 450 and added:

“It is nearly forty years since those words were said by Scrutton LJ and it appears that they have still not been properly appreciated by some solicitors. Perhaps they have never been read by many of them”.

63    A further forty years have elapsed and more since Danckwerts J gave his judgment in Goody v Baring but the present case illustrates the wisdom behind the remarks of both judges. It is particularly difficult when acting on the sale of a business for the same solicitor to comply with his duties to the vendor and the purchaser. It may be possible to do this in the vast bulk of cases involving the sale of land under the Real Property Act but on the sale of a business it seems to me it is practically impossible, particularly on the sale of a business such as this. The result that the appellant finds himself in was entirely foreseeable in the situation in which he allowed himself to be placed by acting for the vendors of a failing business and inexperienced purchasers of that business. In fact the appellant conceded that had he not been acting for both parties he would certainly have advised the respondents of the extent of the arrears of rent (Black 2/307-8). I agree with the orders proposed.

64    MASON P: The orders will be as indicated by Heydon JA.

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