Chew v Amanatidis

Case [2009] SASC 334

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

CHEW v AMANATIDIS

[2009] SASC 334

Judgment of The Full Court

(The Honourable Justice Gray, The Honourable Justice White and The Honourable Justice Kelly)

3 November 2009

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT - IN GENERAL

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DUTY OF CARE - SPECIAL RELATIONSHIPS AND DUTIES - OTHER CASES

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - WHERE ECONOMIC OR FINANCIAL LOSS - CARELESS ADVICE, STATEMENTS AND NON-DISCLOSURE - PARTICULAR PERSONS AND SITUATIONS - OTHER CASES

Appeal from judgment on a third party claim - in District Court proceedings, plaintiffs claimed damages with respect to a contract of indemnity given by defendant (respondent) - defendant brought third party claim claiming that defendant had been induced to enter into contract of indemnity as a consequence of the third party's negligent misrepresentation - Judge found that third party owed defendant a duty of care and had acted in breach of that duty - whether third party owed defendant a duty of care - whether duty breached - whether reasonable reliance established - whether special relationship established.

Held (Gray and Kelly JJ): appeal allowed - defendant a man with business experience and acumen - no duty of care arises - no special relationship established - any reliance contended not reasonable in circumstances.

Held (White J): appeal dismissed - trial Judge did not err in findings of fact - defendant breached duty of care owed to the third party- Judge's determination that it was reasonable for respondent to act on advice of the appellant not demonstrably incorrect.

D’Aloia & Anor v Amanatidis-Amanatidis v Chew [2008] SADC 128; Fox v Percy (2003) 214 CLR 118; Jones v Hyde (1989) 63 ALJR 349; Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472; SRA (1999) 73 ALJR 306; Voulis v Kozary (1975) 180 CLR 177; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326; Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; Brunskill v Sovereign Marine & General Insurance Co Pty Ltd (1985) 59 ALJR 842; Chambers v Jobling (1986) 7 NSWLR 1; Perre v Apand Pty Ltd (1999) 198 CLR 180; Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556; San Sebastian Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340; Tepko Pty Ltd v Water Board (2001) 206 CLR 1; Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; Bryan v Maloney (1995) 182 CLR 609; O’Leary v Lamb (1973) 7 SASR 159; Presser v Caldwell Estates Pty Ltd [1971] 2 NSWLR 471; Shaddock & Associates Pty Ltd v…

Continue reading Chew v Amanatidis

Sign in free to access the full text

Details
AGLC
Chew v Amanatidis [2009] SASC 334
Case
[2009] SASC 334
Decision Date

CaseChat Overview and Summary

In the case of Chew v Amanatidis, the appellant, Chew, appealed against a judgment entered by the District Court which found that Chew owed a duty of care to the respondent, Amanatidis, and had breached that duty, resulting in financial loss to Amanatidis. The appeal raised issues concerning the existence of a duty of care, the breach of that duty, and the reasonableness of reliance on Chew’s advice. The Supreme Court of South Australia was tasked with determining whether the District Court Judge had erred in his findings of fact and in his conclusions of law.

The primary legal issues before the court were whether Chew owed a duty of care to Amanatidis, whether that duty was breached, and whether Amanatidis' reliance on Chew's advice was reasonable. The court had to assess the evidence presented and the relationship between Chew and Amanatidis to determine if the circumstances established a special relationship that would give rise to a duty of care. The court also needed to consider whether Amanatidis' reliance on Chew’s advice was justified given the nature of the investment scheme and Amanatidis' business experience.

The court found that the District Court Judge did not err in his findings of fact. The Judge’s determination that Chew had indeed advised and encouraged Amanatidis to sign the indemnity agreement was supported by the evidence. The court further held that the relationship between Chew and Amanatidis did not establish a special relationship that would impose a duty of care. Given Amanatidis' significant business experience, the court concluded that his reliance on Chew's advice was not reasonable in the circumstances. The court found that the ludicrous nature of the investment returns meant that any legitimate businessperson would have recognized the improbability of such high returns, and thus, any reliance was unreasonable. Consequently, the appeal was dismissed, and the District Court's judgment was upheld.

The final orders of the court were to dismiss the appeal, affirming the District Court's judgment that Chew owed a duty of care to Amanatidis, which was breached, but that the reliance by Amanatidis on Chew's advice was not reasonable, and therefore, the claim in tort should be dismissed.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The notice of appeal contains some 28 grounds of alleged error by the District Court Judge. However, on the hearing of the appeal, the appellant advanced three substantive grounds. First, that the Judge’s adverse findings concerning the credibility and reliability of the respondent’s evidence on numerous issues, together with his general acceptance of the evidence of the D’Aloias which, in relevant respects, supported his evidence, meant that the finding that the appellant had advised and encouraged the respondent to sign the indemnity agreement did not have an appropriate foundation in the evidence. Secondly, that his relationship with the respondent was not such as to give rise to a duty of care and, thirdly, that even if his advice had been negligent, it had been unreasonable of the respondent to have acted on it.Background The circumstances giving rise to the claim of the D’Aloias against the respondent were summarised by the Judge as follows:Chew is an accountant. In 1999 he informed Amanatidis of a high yield investment scheme in the United States (“US”) conducted by a US company called Luxor Capital Markets Inc (“Luxor”). Amanatidis was aware that the plaintiffs were interested in investment opportunities and introduced them to Chew.In October-November 1999 the plaintiffs attended a series of meetings with Chew and Amanatidis. Chew explained to the plaintiffs that Luxor bought and sold US government bonds for a profit. The plaintiffs were informed that funds invested in the scheme, and profits derived from the investment, would be deposited into, and disbursed from, the escrow account of Mark Talley (“Talley”), an attorney who practised in Memphis, Tennessee. The plaintiffs were further informed that all relevant financial transactions in the US would be conducted on their behalf by Southstar II Limited (“Southstar”), another company based in the US. The plaintiffs were also advised that investment funds held in Talley’s escrow account would be protected under an insurance policy or policies that had been issued to Talley. In the result the plaintiffs decided to invest US $100,000 (“the investment principal”). On 10 November 1999, the plaintiffs and Amanatidis signed, in the presence of Chew, a document (“the Agreement” - exhibit P6) which stated, in part, that “should an event occur where the money is stolen or an insurance payment is denied [Amanatidis] shall pay in full to [the plaintiffs] the principle (sic) ($100 k US)”. The Agreement also recorded the plaintiffs’ agreement to pay Amanatidis a commission equivalent to 4% (four per cent) of the profits the plaintiffs received from the investment. On 11 November 1999 the plaintiffs transferred $156,641.60 (US $100,000) into an overseas account in the belief that the funds would be invested in the scheme. During the ensuing months, the plaintiffs failed to receive any returns from the investment and demanded repayment of the investment principal. In April 2000 the plaintiffs obtained from Southstar a repayment of US $22,500. They failed to recover the balance of the investment principal.[30][30] Ibid at [2]-[5].

Evidence

Evidence Before The Court

The Judge described the evidence relating to the above matters as unhelpful and then continued:[16]The projects in China took place either well before or well after the events relating to the Luxor scheme. Similarly, the parties’ dealings in relation to the shopping centre did not arise until a considerable time after the Luxor events. They were isolated events that did not give rise to a continuing business relationship. On the issue of credit Mr Gretsas conducted a spirited attack on Mr Amanatidis. I must say that there were aspects of Amanatidis’ evidence on these peripheral topics which did not impress me. However they did not cause me to alter my view that Amanatidis told the truth about the central issue of Chew having encouraged and advised him to sign the indemnity.[emphasis added]The Judge in the above paragraph described this evidence of Mr Amanatidis as being given on “peripheral topics”. In my view there was a considerable body of evidence not addressed by the Judge that went to the general business relationship of Mr Amanatidis and Mr Chew, and more importantly to Mr Amanatidis’ business experience and acumen. I consider that this evidence leads to the inescapable conclusion that Mr Amanatidis was an experienced man in business and would have recognised that a minimum return of 25% per week on an investment was the hallmark of a transaction that lacked any commercial or other legitimacy. It is convenient to immediately turn to that evidence. [16] D’Aloia & Anor v Amanatidis-Amanatidis v Chew [2008] SADC 128 at [210]. When giving evidence Mr Amanatidis agreed that he had been involved in many businesses including the management and running of businesses. He admitted to the Court that during the 1970s and 1980s he had been involved in the “entertainment industry, nightclubs and suchlike”. Mr Amanatidis had formerly been married to the daughter of a well-known and reputedly highly successful South Australian businessman, Con Polites, who owned many nightclubs, entertainment venues and whom he described as “a good teacher”. Mr Amanatidis agreed with the cross-examiner that he was given considerable responsibility in the management of the day-to-day affairs of those businesses. He described himself as being “married 16 years with the [Polites] family” and agreed that throughout that period, he was involved in business enterprises connected to a group of companies known as the Polites Group. When pressed in cross-examination, Mr Amanatidis agreed that he was involved, through the Polites Group, with the buying and selling of real estate. He became involved in the overseeing of properties leased by the Polites Group. He agreed that he was closely involved in the business activities of the Polites Group from time to time. At times during cross-examination, Mr Amanatidis sought to give the impression that his involvement was limited. During his involvement with the Polites Group, Mr Amanatidis undertook, but apparently did not finish, a real estate course. However, he worked in the real estate business of Mr Polites. Later he became involved in the running of a food outlet and, in the ownership with others, of a petrol station and 24 hour convenience store business. This group then acquired a second petrol station. Following his involvement in these businesses, Mr Amanatidis became involved with the real estate firm, Savills, and maintained a relationship with a proprietor of that firm until the time of the trial. He would introduce people and potential business opportunities to that proprietor.

Decision

Reasons for decision

GRAY J
In Evatt Kitto J explored the conditions of a special relationship, and partly approached the matter as one of causation:[26]…It is in the nature of words that they cause nothing save by their influence upon the mind of a person whose ears or eyes they reach. Between the words and any loss they may be said to cause to a hearer or reader there must always be the hearer's or reader's decision to follow the course of conduct which proves injurious. Accordingly the question whether the words are properly to be described as a cause of the loss depends upon their potency as an influence upon that decision; and the question whether the speaker or writer of the words could reasonably have foreseen a likelihood that his statement would cause the other to pursue the potentially injurious course becomes a question whether it was reasonable for that other to understand and accept the statement as intended to relieve him, so far as an exercise by the speaker or writer of reasonable care and skill in inquiry (as to facts) or judgment (as to opinions) would do it, from having to bear any loss that a decision to act in reliance upon the statement may bring about. But such an intention is not reasonably to be inferred unless the circumstances of the statement supply a context of the kind which normally characterizes matters of business. …[emphasis added]As to the nature of the special relationship, Kitto J adopted the following observations of Lord Reid in Hedley Byrne, [27] where it was said that a duty of care will exist where:…it is plain that the party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required, where it was reasonable for him to do that, and where the other gave the information or advice when he knew or ought to have known that the inquirer was relying on him. [26] Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 582.[27] Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 583 citing Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 at 486. On the topic of reasonable reliance Kitto J said:[28]…[T]he question whether a person who sought the information or advice was entitled as a matter of law to have care exercised by the person from whom he sought it is thus to be decided by considering whether the circumstances made it reasonable for the inquirer to suppose that the other was replying with an intention of accepting the full responsibility that is ordinarily appropriate to a business transaction.[28] Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 584. In the present proceeding, it is evident from the Judge’s findings that this was at the very least a most unusual transaction. It was not an ordinary business transaction. It is difficult to characterise the transaction as having a serious business purpose when regard is had to the Judge’s findings about the ludicrous nature of the returns. A moment’s thought by a person experienced in business or, for that matter, anybody with a modicum of commonsense would lead to the inevitable conclusion that the proposed investment was a preposterous proposal. A person proceeding with such a transaction would, it might be expected, have been propelled by greed. Having regard to its lack of any commerciality, the transaction could scarcely be described as a business transaction. Having regard to Mr Amanatidis’ years of business experience, this was not an occasion on which one could reach a conclusion that there had been reasonable reliance. Despite Mr Amanatidis’ assertion that he trusted Mr Chew, any suggested reliance that may have followed was not reasonable in the circumstances. To repeat the trial Judge’s conclusion, it is impossible that any legitimate scheme could have yielded such fabulous returns. The circumstances did not give rise to a special relationship and the claim in tort should be dismissed.

Ratio Decidendi

Legal Principle Established

Established by: GRAY J

Full text does not contain this section.