Craig Mostyn and Co Pty Ltd v Atherton
[2007] WADC 184
•25 OCTOBER 2007
CRAIG MOSTYN & CO PTY LTD -v- ATHERTON & ORS [2007] WADC 184
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WADC 184 | |
| Case No: | CIV:181/2005 | 24 SEPTEMBER 2007 | |
| Coram: | STAVRIANOU DCJ | 25/10/07 | |
| PERTH | |||
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| PDF Version |
| Parties: | CRAIG MOSTYN & CO PTY LTD FRANCIS JOHN ATHERTON JOSEPH ANTHONY MARTELLA TERRY MICHAEL FOGLIANI ALAN ROY HANCOCK PETER NORMAN WOOD JOHN ALAN MORRIS DEACONS |
Catchwords: | Practice Practice under the Rules of the Supreme Court of Western Australia Application by third party for summary judgment under O 16 Rules of the Supreme Court or to set aside third party notice under O19 r 6 Claims by defendant against solicitors under retainer, duty of care and Fair Trading Act 1987, s 10 Turns on own facts |
Legislation: | Fair Trading Act 1987 Trade Practices Act 1974 Rules of the Supreme Court 1971 |
Case References: | Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Graham Barclay Oysters Ltd v Ryan (2002) 211 CLR 540 Groom v Crocker [1939] 1 KB 194 Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 Minproc Ltd v Killinger [2001] WASC 347 Pegrum v Fatharly (1996) 14 WAR 92 Townsend & Anor v Roussety & Co (WA) Pty Ltd & Anor (2007) 33 WAR 321 Wickstead & Ors v Browne (1992) 30 NSWLR 1; (1993) 10 Leg Rep SL 2 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
FRANCIS JOHN ATHERTON
JOSEPH ANTHONY MARTELLA
TERRY MICHAEL FOGLIANI
ALAN ROY HANCOCK
PETER NORMAN WOOD
JOHN ALAN MORRIS
Defendants
DEACONS
Third Party
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : DEPUTY REGISTRAR HARMAN
Citation : [2007] WADC 133
(Page 2)
Catchwords:
Practice - Practice under the Rules of the Supreme Court of Western Australia - Application by third party for summary judgment under O 16 Rules of the Supreme Court or to set aside third party notice under O19 r 6 - Claims by defendant against solicitors under retainer, duty of care and Fair Trading Act 1987, s 10 - Turns on own facts
Legislation:
Fair Trading Act 1987
Trade Practices Act 1974
Rules of the Supreme Court 1971
Result:
Appeal allowed
Representation:
Counsel:
Plaintiff : No appearance
Defendants : Mr M F Rynne
Third Party : Mr S F Popperwell
Solicitors:
Plaintiff : Not applicable
Defendants : Tottle Partners
Third Party : Pynt & Partners
Case(s) referred to in judgment(s):
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Graham Barclay Oysters Ltd v Ryan (2002) 211 CLR 540
(Page 3)
Groom v Crocker [1939] 1 KB 194
Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251
Minproc Ltd v Killinger [2001] WASC 347
Pegrum v Fatharly (1996) 14 WAR 92
Townsend & Anor v Roussety & Co (WA) Pty Ltd & Anor (2007) 33 WAR 321
Wickstead & Ors v Browne (1992) 30 NSWLR 1; (1993) 10 Leg Rep SL 2
(Page 4)
- STAVRIANOU DCJ:
Introduction
1 This is an appeal from a decision of a Deputy Registrar granting in favour of the third party an order for summary judgment against the defendants and an order setting aside the defendants' third party notice.
2 By this appeal the defendants seek an order that the orders of the learned Deputy Registrar be set aside and in lieu thereof the application by the third party be dismissed and that the third party pay the defendants' costs of the application.
3 Rule 15 of the District Court Rules 2005 provides that if a party is dissatisfied with the decision of a Registrar, the party may appeal to a Judge. The appeal is by way of a new hearing of the matter that was before the Registrar.
4 The third party submits that the defendants' claims of breach of contract, negligence and contravention of s 10 of the Fair Trading Act 1987 by engaging in misleading or deceptive conduct cannot succeed at trial.
The plaintiff's claim
5 It is appropriate to outline the plaintiff's claim in the action to provide some background to the third party proceedings.
6 The plaintiff's claim against the defendants arises under a guarantee.
7 The guarantee secured a loan by the plaintiff to Old Valley Pty Ltd ("Old Valley") of $1,000,000 pursuant to a Deed of Settlement ("the Deed of Settlement") between the plaintiff and Old Valley. Old Valley and the plaintiff had been in an agency relationship and the Deed of Settlement was to settle a dispute which had arisen.
8 The defendants were at all material times directors of Old Valley.
9 The defendants allege that they signed the guarantee in circumstances where they were led to believe that the Deed of Settlement contained a restrictive covenant. The covenant was for the benefit of Old Valley and provided the plaintiff would not compete with it in its business. The defendants further allege they would not have executed the guarantee if they had known the Deed of Settlement did not contain the restrictive covenant.
(Page 5)
The facts
10 While there are factual matters in issue between the parties, there is no substantial dispute in relation to many of the facts outlined in the affidavits of the parties.
11 The third party is a firm of solicitors which was retained to act on behalf of Old Valley in the resolution of the dispute with the plaintiff. Elizabeth Anne Allnutt had conduct of the matter on behalf of the third party.
12 John Allan Morris and Alan Ray Hancock gave instructions on behalf of Old Valley to the third party.
13 On 14 November 2003, Minter Ellison, a firm of solicitors acting on behalf of the plaintiff emailed to the third party draft security documents, including a draft directors' guarantee. Ms Allnutt on that same day emailed Mr Hancock. Her email referred to and attached security documents and the draft guarantee. It also referred to the proposed Deed of Settlement and stated:
" … the restrictive covenant in relation to customers will be alright provided that all the customers to which it relates are overseas. Please review the customer lists in schedules 3, 4 and 5 and let me know if there are any Australian customers that need to be removed. We can let you have a written advice in this aspect on Monday if you require it …"
14 In the email Ms Allnutt referred to the guarantee and stated:
"I will review the security documents insofar as they relate to OVPL but I will not be reviewing or advising on the directors' guarantee documentation. In this regard I confirm that each director should seek independent legal advice on the consequences of entering into the guarantees …"
15 It is the defendants' case that they executed the guarantee, which had been enclosed with Ms Allnutt's email on 14 November 2003, prior to attending a meeting on 17 November 2003 to execute the Deed of Settlement.
16 It is Ms Allnutt's evidence that on or before 17 November 2003, Mr Hancock told her that he intended to speak to an independent lawyer about advising the Old Valley directors on the consequences of entering
(Page 6)
- into a guarantee in terms of the draft which had been enclosed with the email of 14 November 2003.
17 At or about 12.05 pm on 17 November 2003, Ms Allnutt emailed Mr Hancock a letter. It commences:
"I now write with advice with regard to the security documentation which Old Valley Pty Ltd (Company) proposes to enter into with Craig Mostyn and Co Pty Ltd (Craig Mostyn).
The relevant provisions are contained in a fixed and floating charge over the assets and undertaking of the Company. I have also reviewed some ancillary documents but I have not reviewed the guarantee and indemnity which the directors of the Company have been asked to sign. I confirm my advice that the directors should obtain independent advice about that document and you were to discuss it with John Vaughan (who has been instructed to act on behalf of the shareholders of the company – other than Craig Mostyn).
My advice in respect of the security document (which is in identical format to the documentation which Minter Ellison produced for Westpac Bank Incorporation (Bank) last year) is as follows: …"
18 It is the evidence of Mr Hancock that until the morning of 17 November 2003 all communications concerning the Deed of Settlement were sent directly by email from the plaintiff to Mr Morris and himself.
19 Mr Hancock's evidence is that Old Valley would not enter into a Deed of Settlement without there being a restrictive covenant in place. It is his evidence that the restrictive covenant had been in the drafts of the Deed of Settlement. However, it was deleted from the Deed of Settlement which was executed. The deletion occurred in circumstances where neither Old Valley nor the defendants gave instructions to the third party to agree to the deletion. I note that there is a dispute of fact in that regard.
20 The defendants' case is that on 17 November 2003 at a meeting at the offices of Minter Ellison they were asked to sign the Deed of Settlement and a further guarantee. The Deed of Settlement which did not contain a restrictive covenant and the guarantee were executed at the meeting.
(Page 7)
21 The defendants' case is that they would not have executed the Deed of Guarantee had they known of the deletion of the restrictive covenant from the Deed of Settlement.
The Third Party claim
22 The defendant relies upon three causes of action in the third party proceedings.
23 First it is alleged that there existed an implied retainer as between the defendants and the third party which the third party breached by failing to communicate to the defendants and Old Valley that the Deed of Settlement did not contain a restrictive covenant.
24 Second it is alleged that the third party was in breach of a duty of care. What is alleged is that the third party was to ensure that the defendants were adequately and properly informed of the position of the negotiations between the plaintiff and Old Valley such that they were aware of the transaction giving rise to the loan they were to guarantee.
25 Thirdly the defendants rely on s 10 of the Fair Trading Act 1987. They allege that by silence as to the removal of the restrictive covenant from the Deed of Settlement the third party engaged in misleading or deceptive conduct.
The legal principles and statutory framework
26 The principles applicable to an application for summary judgment are well settled.
27 The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried. Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99.
28 In Dey v Victorian Railways Commissioners (1949) 78 CLR 62 Dixon J (as he then was) said, at 91:
"A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is
(Page 8)
- vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous or vexatious and an abuse of process."
29 An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment. Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 at 256 per Kirby J.
30 The application to set aside the third party notice is made pursuant to O 19 r 6 of the Rules of the Supreme Court. To succeed the third party must demonstrate that the notice cannot succeed (see Minproc Ltd v Killinger [2001] WASC 347 at [36] - [37]).
31 In General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, Barwick CJ discussed the principles applicable to a court's power to terminate an action summarily. He said at 129:
"… the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'.
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through
(Page 9)
- them, that it is a case that does not admit of reasonable argument'; 'so to speak apparent at a glance'."
Conclusion
32 The retainer the defendants rely upon is alleged to be implied and is limited to the giving of advice as to the position of "the negotiations between the Plaintiff and Old Valley …".
33 A retainer will be presumed if the conduct of the parties shows that the relationship of solicitor and client has, in fact, been established between them.Groom v Crocker [1939] 1 KB 194 per Scott LJ at 222.
34 In Pegrum v Fatharly (1996) 14 WAR 92 Anderson J (with whom Kennedy J agreed) said, at 102:
"When both parties to a transaction consult the same solicitor and together give him the information needed to prepare the documents in which their respective rights and obligations are to be set out and the solicitor accepts responsibility to prepare the documents without any indication that he cannot fully discharge his professional duties to them both there is a strong bias towards finding that the solicitor tacitly agrees to act for both parties and to undertake the usual professional responsibilities to them both: seeMidland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 esp at 396. In the absence of a clear indication by the solicitor that the solicitor does not accept one of the parties as his client it is natural in such a case to assume both are relying on him for professional advice and assistance. This follows from the mere fact that both have consulted him. There may be other circumstances which show that there is no reliance by one or other of the parties on the solicitor, but, if not, reliance should be inferred as a fact. And when a solicitor accepts responsibility to do professional work requiring special knowledge and skill and there is in fact a reliance on him to apply his expert knowledge and skill in the performance of that work, there exist 'the elements which lie at the heart of the ordinary relationship between a solicitor and his client ...': seeHawkins v Clayton (1988) 164 CLR 539 at 578, per Deane J. This is not a special rule applicable only to solicitors, I do not think. For an example of its application to a statutory auditor seeShire of Frankston & Hastings v Cohen (1960) 102 CLR 607 at 619, per Fullagar J.
(Page 10)
- This does not mean a solicitor whose services are sought by both parties is bound to accept that he is to serve both parties. He can refuse to do so and elect to act for one party only. This requires a very clear statement by the solicitor that this is to be his position. It has even been held that he is duty bound in such a case to positively recommend that the other party get another solicitor and take independent advice before entering into the transaction, and in the event that recommendation is not followed, to give him proper advice as to the risks in signing the documents: seeIrvine v Shaw [1992] ANZ Conv R 83."
35 Also see Townsend & Anor v Roussety & Co (WA) Pty Ltd & Anor (2007) 33 WAR 321 per Buss JA at [77] - [78] (with whom Wheeler and Mclure JJA agreed).
36 The defendant submits that the email of 14 November 2003 was sent to Mr Hancock as "liaison point for Old Valley and as agent for the directors who are potential guarantors". The email is addressed to Mr Hancock. The letter from Ms Allnutt of 17 November 2003 is addressed to "Mr Alan Hancock Old Valley Pty Ltd."
37 The Third Party relies upon the express written notice given to the defendants that they should obtain independent advice as to the guarantee they were required to execute. Further, the evidence of Ms Allnutt is that the defendants told her they were seeking advice from another lawyer.
38 Whilst the defendants were advised to seek independent advice as to the guarantee it is their case that they relied on the third party as to the terms of the Deed of Settlement.
39 I acknowledge there is force in the submissions of the third party concerning the existence of an implied retainer. However, whether the existence of a retainer should be inferred and, if so, the nature and scope of the retainer will require an examination of all of the facts and circumstances established at trial.
40 The defence submission is that the email of 14 November 2003 contained a representation as to the restrictive covenant contained in the draft of the Deed of Settlement.
41 The guarantee and the Deed of Settlement were executed on 17 November 2003. The defendants' case is that the Deed of Settlement and the guarantee were executed at a meeting at the office of Minter Ellison. Ms Allnutt attended that meeting.
(Page 11)
42 The defendants' submission is that as the third party knew the provision of directors' guarantees was one of the matters the subject of negotiation the third party knew that the defendants had interests as directors of Old Valley as well as prospective guarantors.
43 There is a dispute of fact as to whether Ms Allnutt told Old Valley before the Deed of Settlement was executed that the restrictive covenant had been deleted.
44 The third party submits that it would be unreasonable in all the circumstances to impose a duty of care. (Graham Barclay Oysters Ltd v Ryan(2002) 211 CLR 540.) The submission of the third party is that on any view of the evidence there could be no finding that the third party did something that created a reasonable expectation on the part of the defendants that the third party would be looking after their interests.
45 The third party was aware that the instructions from its client were being provided by two of the defendants. In the email of 14 November 2003 it was stated that the restrictive covenant "would be alright."
46 While the defendants were advised to seek independent advice as to the guarantee it is their case that they relied on the third party as to the terms of the Deed of Settlement. When the Deed of Settlement was amended by deletion of the restrictive covenant they should on their case had been advised of that deletion.
47 The plea in relation to the misleading or deceptive conduct claim relies upon the same facts as the breach of duty claim. The third party submission is that if the third party did nothing to ground a duty of care it could hardly be said that there was any misleading or deceptive conduct by silence.
48 In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, Gummow J explained the circumstances in which silence may amount to misleading or deceptive conduct. His Honour said at 40 - 41:
" … the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation: see Henjo [above] at 93, per Lockhart J, and see Mr Justice R S French's paper 'Law of Torts and Part V of the Trade Practices Act' in P D Finn (ed), Essays on Torts (1989), pp 186 – 188. I agree also with
(Page 12)
- the remarks by French J in Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53, 193 at 53, 195 where, after referring to various authorities, his Honour said:
'If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, s 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure.
The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.' "
"Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of 'mere silence' or of a duty of disclosure can divert attention from that primary question. Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
50 As the reasons in Demagogue Pty Ltd v Ramensky (supra) demonstrate a finding of misleading or deceptive conduct necessarily involves a consideration of all the circumstances.
51 The issues raised by the defendants require examination of all of the facts and circumstances at a trial. It has not been demonstrated that any of the causes of action in the third party notice cannot succeed. This is an appropriate case in which the defendant should be able to have each of its
(Page 13)
- causes of action determined at trial. (Wickstead & Ors v Browne (1992) 30 NSWLR 1 at 1 – 5; (1993) 10 Leg Rep SL 2).
52 It was accepted that the defendants' pleading in the third party proceeding may require amendment to reflect the submissions made. I will hear the parties in relation to that matter.
53 The appeal should be allowed.
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