Creative Typographics Pty Ltd and Ernst, Victor Andrew and Ernst, Marilyn Anne v Glade-Wright, Robert
[1999] TASSC 20
•4 March 1999
[1999] TASSC 20
PARTIES: CREATIVE TYPOGRAPHICS PTY LTD
and
ERNST, Victor Andrew
and
ERNST, Marilyn Anne
v
GLADE-WRIGHT, Robert
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 1783/1995
DELIVERED: 4 March 1999
HEARING DATE/S: Written submissions received 11 August 1998 and
21 September 1998
27, 28, 29 and 30 July 1998
JUDGMENT OF: Slicer J
CATCHWORDS:
Professions and Trades - Lawyers - Solicitor and client - Duties and liabilities to client - Transactions and proceedings on behalf of client - Exercise of skill - Liability for negligence - What constitutes negligence - Experienced law clerk asked to give advice on contract already entered into by plaintiffs.
Aust Dig Professions and Trades [85]
Torts - Negligence - Essentials of action for negligence - Damage - Causation - Generally - Loss suffered by plaintiffs not attributable to advice given by defendant.
Medlin v State Government Insurance Commission (1994 - 1995) 182 CLR 1, referred to.
Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191; Hall and Others v Foong (1995) 65 SASR 281, followed.
Amadio Pty Ltd v Henderson (1998) 81 FCR 149; Kenny & Good Pty Ltd and Another v MGICA (1992) Ltd (1997) 147 ALR 568, considered.
Chappel v Hart (1998) 156 ALR 517, applied.
Aust Dig Torts [60]
Torts - Negligence - Essentials of action for negligence - Duty of care - Special relationships and duties - Professional persons - Solicitor professing expertise in a particular area of law - Standard of care commensurate with expertise.
Yates Property Corporation (in liq) v Boland and Others (1998) 157 ALR 30, followed.
Rogers v Whittaker (1992) 175 CLR 479, applied.
Aust Dig Torts [42]
Evidence - Admissibility and relevancy - Opinion evidence - Expert opinion - In general - Evidence given by expert solicitor witness.
Permanent Trustee Australia Ltd v Boulton & Permanent Trustee Australia Ltd v Lynjoe Pty Ltd (1994) 33 NSWLR 735; Yates Property Corporation (in liq) v Boland and Others (1998) 157 ALR 30, followed.
Aust Dig Evidence [55]
REPRESENTATION:
Counsel:
Plaintiff: A M Blow QC
Defendant: P E Barker
Solicitors:
Plaintiff: Guy F Abel
Defendant: Butler, McIntyre & Butler
Judgment category classification:
Court Computer Code:
Judgment ID Number: [1999] TASSC 20
Number of pages: 15
Serial No 20/1999
File No 1783/1995
CREATIVE TYPOGRAPHICS PTY LTD ACN 003 611 425 and
VICTOR ANDREW ERNST and MARILYN ANNE ERNST v
ROBERT GLADE-WRIGHT (t/as Glade-Wright & Co,
Barristers and Solicitors)
REASONS FOR JUDGMENT SLICER J
4 March 1999
The plaintiff company, Creative Typographics Pty Ltd ("Creative Typographics") is owned and operated by the second and third named plaintiffs and took its present name after they had purchased a business in 1993 bearing that name through their then company, Pyopo Pty Ltd. Subsequent to the purchase of that business they retained the corporate entity but changed its name to reflect the new commercial operation. Mr and Mrs Ernst had previously worked in and operated a number of businesses in New South Wales and were experienced in commerce. They had retained the defendant as their solicitor in their purchases of land, a family home and a previous business, and the work had been completed to their satisfaction. On those occasions the legal work had been performed by Malcolm Fife, an experienced law clerk employed by the defendant. Mr and Mrs Ernst understandably believed Mr Fife to be a qualified legal practitioner, although he had never represented himself to be so qualified.
The only difficulty experienced in those transactions concerned the conduct of the vendor of the previously purchased business, and Mr Ernst resolved to be more cautious in his future commercial transactions.
In June 1993, Mr and Mrs Ernst were interested in acquiring a new business. Negotiations were commenced, through an agent, for the purchase of Creative Typographics which conducted a design and typesetting service in the field of publishing. The directors of Creative Typographics were Yvonne Soundy and Dorothy Shield who were also partners in an unincorporated business, Artemis Publishing Consultants ("Artemis"). Artemis is best described as an umbrella publisher involved in the production of brochures, newsletters, reports and the like. It was responsible for matters such as copyright, editing, photography, layout and distribution. It did not undertake all of this work but arranged for its performance through other specialist sub-contractors, including Creative Typographics. Given that Artemis and Creative Typographics operated from the same premises and that Soundy administered both entities, the interrelationship was both convenient and productive and any purchaser of Creative Typographics could expect to receive most of the relevant sub-contract work from Artemis.
During the initial negotiations, the agent provided Mr Ernst with a business plan which represented the business to have had an annual adjusted net profit of approximately $158,000 over the preceding three years. Mr Ernst, having inspected the premises and being shown a selection of invoices and debtors' ledgers, made an offer of purchase which was subject to finance. A contract was executed and the agent instructed to forward a copy to Mr Fife, who had not been involved in either the negotiations or the drafting of the contract. Although Mr Fife has no recollection of the event, the Court accepts Mr Ernst's account that following the execution of the contract he:
"… rang Malcolm and told him about the purchase and asked him whether he would act for us and indicated that documents would be forthcoming from Allan Clarke." (t53)
An undated file note of the defendant supports that account, although no copy of the lapsed contract remains on the file.
The plaintiffs were unable to obtain the necessary finance and the agreement lapsed.
In September 1993, the agent again contacted Mr Ernst and suggested that an alternative offer of purchase might be productive and eventually a fresh agreement was reached. It is that agreement, again one prepared without the involvement of Fife, which is the subject of this action. The contract describes the vendor as being Creative Typographics Pty Ltd and the purchaser as Pyopo Pty Ltd. Each of the parties executed its own counterpart and the "duty stamped" copy bears the date 26 October 1993. The terms of the agreement fixed the date of completion as 1 November 1993 and it was made subject to finance. The agreement was, subject to equitable remedies, mutual variation and the finance clause, enforceable as against both parties. The advice of Fife had not been sought prior to execution.
The plaintiffs' claim concerns the advice subsequently provided by Fife and the options which were available to them. That area, which involves resolution of disputed facts, requires separate consideration.
Concurrent with the agreement for sale, a separate lease agreement was made between Pyopo Pty Ltd, Mr and Mrs Ernst as guarantors, and the three owners of the premises, one of whom was Soundy. One of the terms of the agreement of sale provided for the continued involvement of Soundy in the business operations for a period of four weeks.
Initially, the relationship between Artemis and Creative Typographics was harmonious and both continued to operate from the same premises. However, by July 1995, the plaintiffs claimed that Artemis had enticed away some of their staff, failed to provide contract work and was itself engaged in commercial activity which contravened the agreement for sale. Following disputation, Mr Ernst sought the advice of Fife who referred him to the defendant. The file note records the statement of instructions given on 26 July 1995:
"We can't object to Artemis referring typesetting work to others if they don't own that work. We assumed that Artemis would continue referring their typesetting work to us beyond the 12 months. We sought 12 months guarantee of referred typesetting as we were taking on heavy financial risks through CBFC Finance.
…
The typesetting work which we ceased to get is now either being referred elsewhere to other typesetters (which they are entitled to do under clause 26) or being done themselves, contrary to the restrictive covenant in clause 19."
The Court accepts that as of that date the plaintiffs believed that they had some protection by reason of the covenants contained in the agreement, but the existence of that belief does not resolve the issues of awareness, advice and conduct as of November 1993.
This action was commenced following the realisation by the plaintiffs that they had little, if any, basis for remedy against the owners of Artemis.
Terms of agreement
One of the concerns of the plaintiffs, heightened perhaps by Mr Ernst's difficulties with a previous vendor, was to protect their new business from unexpected competition, particularly from Soundy. The terms of the agreement, designed to achieve that aim, form the basis of this action.
The relevant terms, after amendment, as drafted are:
"19 The Vendor covenants with the Purchaser that it shall not for a period of three (3) years from the actual date of completion of this Agreement either directly or indirectly or as principal agent employee or otherwise carry on or be concerned or engaged in the business of typesetting within Tasmania.
…
26 The Vendor shall cause its associated business, Artemis Publishing Consultants, to place all work that the Vendor currently services and produces for Artemis Publishing Consultants (in particular the typesetting and computergraphic work components) with the Purchaser for a minimum of one (1) year from the actual date of completion of this Agreement. This obligation of the Vendor shall be subject to the Purchaser, to the reasonable satisfaction of Artemis Publishing Consultants, providing a standard of work, service and product at least equivalent to that currently provided by the Vendor to Artemis Publishing Consultants and at prices no greater than that currently paid by Artemis Publishing consultants to the Vendor for such work and services."
The causes of action pleaded in relation to these clauses are that Fife, on review of the agreement, advised that it was in standard form and that having expressed some concern as to the effect of cl 26 failed to ensure proper modification.
Allegations of negligence and breach of contract
The allegations as pleaded are:
¨ failure to inform the plaintiffs that Malcolm Fife was a law clerk and not legally qualified as a solicitor;
¨ failure to advise that the covenant did not restrict personally either Yvonne Soundy or Dorothy Shield;
¨ failure to advise that the agreement be amended so as to prevent Soundy and Shield from being personally concerned with or engaged in the business of typesetting for a period of three years within Tasmania or to impose any other appropriate restrictions to protect the plaintiffs' interests;
¨ failure to correctly advise as to the legal effect of cl 19, namely that Fife failed to advise the plaintiffs of the requirement to make Soundy and Shield parties to the contract or to provide any effective restraint or both.
Causation
The relevant principles of causation are those stated by the High Court in Medlin v State Government Insurance Commission (1994 - 1995) 182 CLR 1 at 6, when the court (or judge) stated:
"For the purposes of the law of negligence, the question whether the requisite causal connection exists between a particular breach of duty and particular loss or damage is essentially one of fact to be resolved, on the probabilities, as a matter of common sense and experience (See Fitzgerald v Penn (1954) 91 CLR 268 at 277-278; March v Stramare (E and MH) Pty Ltd (1991) 171 CLR 506 at 515, 522-523; Bennett v Minister of Community Welfare (1992) 176 CLR 408 at 412-413, 418-419, 428.). And that remains so in a case such as the present where the question of the existence of the requisite causal connection is complicated by the intervention of some act or decision of the plaintiff or a third party which constitutes a more immediate cause of the loss or damage. In such a case, the 'but for' test, while retaining an important role as a negative criterion which will commonly (but not always) exclude causation exclude causation if not satisfied, is inadequate as a comprehensive positive test (See, eg, March v Stramare (E and MH) Pty Ltd (1991) 171 CLR at 515-519, 522-524). If, in such a case, it can be seen that the necessary causal connection would exist if the intervening act or decision be disregarded, the question of causation may often be conveniently expressed in terms of whether the intrusion of that act or decision has had the effect of breaking the chain of causation which would otherwise have existed between the breach of duty and the particular loss or damage. The ultimate question must, however, always be whether, notwithstanding the intervention of the subsequent decision, the defendant's wrongful act or omission is, as between the plaintiff and the defendant and as a matter of common sense and experience, properly to be seen as having caused the relevant loss or damage."
It is clear from the terms of the agreement in cl 19 that the covenant did not bind the partners of Artemis, and thus two questions arise. The first is whether in fact there has been a breach of the covenant by the former directors of Creative Typographics and partners of Artemis, and whether such breach occasioned loss to the plaintiffs. The second is whether that loss was caused by the defendant's negligent advice and, assuming that different advice ought to have been given, whether the plaintiffs could or would have acted differently (Hall and Others v Foong (1995) 65 SASR 281; Hanflex Pty Ltd v NS Hope & Associates [1990] 2 Qd R 218).
The plaintiffs, although inexperienced in the particular skills of the industry, were competent managers and inherited the staff of the business including the benefit of the experience of Soundy. Even allowing for ordinary difficulties experienced in any transfer, the financial records indicate a decline in return consistent with the conclusion that the partners of Artemis did not act in accordance with the spirit of the agreement.
The pre-sale figures of Creative Typographics as set out in the vendor's business profile disclose:
| 1990 - 1991 | 1991 - 1992 | 1992 - 1993 | |
| Turnover | $481,344 | $453,088 | $447,888 |
| Expenditure | $472,878 | $437,465 | $431,049 |
| Net Profit | $8,460 | $15,623 | $16,839 |
However, by means of calculations known as "Addbacks" which included provision for amortisation of lease payments (which differed significantly from those payable for the rental from 1994 onwards) and the salaries of the proprietors, the adjusted net figures were stated as:
1990 - 1991
1991 - 1992 1992 - 1993 Adjusted net profit $158,935 $164,056 $153,649
The comparable figures taken from the post-sale records of Creative Typographics disclose:
(part year) 1994
1995 1996 1997 Sales $149,650
$287,718 $276,536 $333,937 Expenses $181,812
$266,909 $268,039 $297,517 Profit/loss (-$32,162) $20,809 $19,540 $47,599
Allowance is made for the vagaries of accounting and the use of figures to enhance apparent profitability for the purpose of sale whilst reducing the same for the assessment of taxation, but regard is had to the figures for gross receipts. Further, all parties were aware, at the time of sale, that the impending loss of a significant client would affect returns. Nonetheless, the financial records show that the business, sold as a going concern, suffered a significant reduction in its net profit. An analysis of the job and ledger sheets for the period November 1993 to October 1996, especially when compared with the equivalent pre-sale documentation, supports the conclusion that Artemis did not fulfil its side of the bargain. Even if one accepts the effect of a general economic downturn, the variation remains significant. The pre-sale relationship between Artemis and Creative Typographics was complementary and enhanced for business efficiency. The financial returns show a substantive alteration to the basis of that relationship and accordingly a decline in profits. The plaintiffs' evidence that certain members of staff were found to be engaged in either part-time or full-time work for Artemis, coupled with the very nature of that work, warrants the conclusion that Artemis diverted clients away from Creative Typographics and performed work which had been the province of Creative Typographics. Artemis was required to direct all its own work to Creative Typographics for a period of twelve months. Further, Soundy and Shield were precluded, by the spirit of the covenant, valid or otherwise, from being involved directly or indirectly in the business of typesetting.
In May 1994, an experienced typesetter employed by Creative Typographics obtained work with Artemis. In July 1994, another employee was found to have been performing part-time work for Artemis and that discovery led to the plaintiffs seeking further advice from the defendant. Another employee involved in layout work also commenced employment with Artemis. Further, a number of previous clients were seen to be placing their business with Artemis, and evidence was given that certain work was directed by Artemis to a company, Civet Management Pty Ltd. Where the evidence of the plaintiffs and their witnesses differs from that of Soundy on this issue, that of the plaintiffs is preferred. Soundy claimed that the fall in return was caused by a decline in the quality of work and a normal pattern of client movement, and denied that Artemis performed work precluded by the terms of the agreement. That evidence is belied by the financial records of Creative Typographics, the observations of the plaintiffs, the nature of the equipment used by Artemis and the evidence of the employees called in support of the plaintiffs' case.
The conclusion reached is that there was a breach of the spirit of the agreement by the directors of the vendor company and that the plaintiffs have suffered loss by reason of those breaches. However, the terms of the covenant preclude any remedy being had against Artemis, Soundy or Shield. Any finding of legal causation in tort or contract would require the defendant to be held responsible for that loss and damage.
Status of Malcolm Fife
A separate pleading of negligence claims that the defendant:
"(e) failed to inform the Plaintiffs that Malcolm Fife was a law clerk and not legally qualified as a solicitor."
The status of Fife is also relevant to the question of the standard of care required of the defendant and it is convenient to consider both questions together.
Mr Fife commenced work as a law clerk with a Hobart firm of solicitors in 1948, remaining with that firm for thirty-one years. He was then employed in New South Wales in the performance of legal work for two years, and upon his return to Tasmania, resumed work as a law clerk with another law firm, and thence with the defendant. At the time of the relevant transactions he had been employed in the commercial and conveyancing areas of the law for some forty-six years. It would be fair to say that his experience made him well qualified to undertake work of the nature required by the plaintiffs and that the degree of skill possessed by him equals that of many legal practitioners. Certainly the degree of care required of him in the circumstances of the case is identical to that required of a legal practitioner. It matters not that he possessed no formal qualifications, nor that the plaintiffs believed him to possess such qualifications. He did not represent himself to have those qualifications and the Court does not accept the contention that the plaintiffs would not have engaged the defendant if they had known he was not legally qualified but were made aware of his experience. They were entitled to assume that if he found a problem to be particularly complicated and beyond his knowledge or experience, he would seek specialist advice; but the same could be said of any solicitor, especially a junior one. The degree of skill expected of Fife is that required of a solicitor engaged in commercial work of the nature required by the plaintiffs (Sacca v Adam and R Stuart Nominees Pty Ltd (1983) 33 SASR 429). But it does not follow that the failure to advise the plaintiffs of his status affords the plaintiff a cause of action. The cause of action based on representation is not sustainable.
Opinion evidence
The plaintiffs called John Upcher, a legal practitioner well experienced in commercial matters and a member of the Conveyancing Committee of the Law Society of Tasmania. Opinion evidence was led without objection and when the Court made enquiry of the basis on which it was led, learned counsel for the plaintiffs replied that:
" … what I was asking was subtly different. I was asking him not what they meant but what advice, if any, he would have considered appropriate. Now, certainly, if he says the hypothetical solicitor should have said 'x' then there is a presupposition as to a point of domestic law but I submit that that can't be avoided but that it's appropriate that this witness express any view that he has not only as to precaution and enquiries that ought to be made by the solicitor."
Interpretation of the limits of this Delphic response can await another day, but the Court will accept the import of the evidence as being limited to whether the presence of a covenant in the terms of cl 19 would have, at the relevant time, alerted a commercial practitioner to a problem and what steps could be taken to avoid such. The action which Mr Upcher would have taken would be to make full enquiry, consider more fully the extent of the covenant, and to draft a "Restraint of Trade Agreement", which would bind the vendor and any other persons (including the directors and possibly key employees) who might be engaged in the business. He gave no evidence as to how he would approach a contract already made.
However, the following words of Oliver J in Midland Bank Trust Co Ltd and Another v Hett, Stubbs & Kemp (a firm) [1979] 1 Ch 384, should be borne in mind:
"I must say that I doubt the value, or even the admissibility, of this sort of evidence, which seems to be becoming customary in cases of this type. The extent of the legal duty in any given situation must, I think, be a question of law for the court. Clearly, if there is some practice in a particular profession, some accepted standard of conduct which is laid down by a professional institute or sanctioned by common usage, evidence of that can and ought to be received. But evidence which really amounts to no more than an expression of opinion by a particular practitioner of what he thinks that he would have done had he been placed, hypothetically and without the benefit of hindsight, in the position of the defendants, is of little assistance to the court; whilst evidence of the witnesses' view of what, as a matter of law, the solicitor's duty was in the particular circumstances of the case is, I should have thought, inadmissible, for that is the very question which it is the court's function to decide."
That view was also expressed by the Full Court of the Federal Court of Australia in Yates Property Corporation (in liq) v Boland and Others (1998) 157 ALR 30, when the court said at 56:
"… such evidence [is] of little assistance … We think that a court is well placed to determine the liability in negligence of a legal practitioner without the aid of such evidence where questions of particular practices do not arise. Moreover, a court runs a real risk of falling into error when it places principal reliance on the expert testimony of witnesses instead of forming its own view of the applicable principles of law, the duties owed by barristers and solicitors and the appropriate standards in accordance with which those duties must be performed."
However, the opinion evidence of Mr Upcher might be relevant to the issue of accepted practice. There is a distinction between the standard of care required of a specialist practitioner as distinct from one who is simply held out as being generally proficient. As Drummond, Sundberg and Finkelstein JJ stated in Yates Property Corp (supra) at 50:
"In the last fifteen years or so there have been two significant changes in the nature of the practice of solicitors. The first is that there has been a sharp increase in the size of firms. Large firms are becoming larger and small firms are merging to become larger. Secondly, there has been a change in the nature of work that solicitors, especially in these large firms, do. Their work has become more specialised. Few solicitors in large firms carry on a general practice. This is also increasingly true of smaller firms many of whom specialise in one or two narrow branches of the law. It has become fashionable to refer to these small firms as 'boutiques'.
When a firm, whether large or small, has developed a particular expertise in some area of the law it is difficult to see why as a matter of principle the standard of care in accordance with which that a firm should carry out its professional work should be judged by reference to the standard of care of an ordinary practitioner. Indeed, there is every reason to think that this should not be the case. Not too long ago a client would utilise the services of one particular firm of solicitors for whatever legal work that client required from time to time. Nowadays that client will look for advice from a firm that is expert in the area of the law that is of concern to the client. He may even use two or three firms in one matter where that matter involves discrete areas of the law and one firm is not expert in all of those areas.
When a client retains a firm that is or professes to be specially experienced in a discrete branch of the law that client is entitled to expect that the standard of care with which his retainer will be performed is consistent with the expertise that the firm has or professes to have. Such a client would no doubt be justifiably dismayed if he was told that the firm that he has retained because of its experience is only required to act in accordance with the standards laid down for a solicitor who has only a general or even only a little knowledge of the law that is to be applied to the facts of the client's case."
In determining the questions of "what is common practice amongst solicitors of good repute" (Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 at 738), and the standard of care required of a specialist practitioner or one held out to be such, a court might have recourse to the opinion of one who is acknowledged to be experienced in the particular area of practice under consideration. To that extent, regard is had to the evidence of Mr Upcher. However, ultimately it is for the client to consider the advice and give instructions accordingly. But it is for the practitioner to clearly state the area of speciality and if he or she does not possess expertise commensurate with the problem or transaction and fails to so alert the client, then that practitioner ought be held to the appropriate standard of care. That standard will be applied in the circumstances of this case. The issue is, however, whether the appropriate advice was given. The opinion evidence given by Mr Upcher accords with the original file note of Mr Fife in that both identify privity and unforeseeability as issues central to this particular commercial transaction.
Negligence
There can be little doubt that failure to advise a client that the contract, cl 19, did not personally bind the parties of Artemis, constitutes negligence. There can be little doubt that a failure to advise the purchasers that cl 26 did not ensure that the partners of Artemis were required to provide work, amounts to a breach of the duty of care. The standard of care required of the defendant was that of a reasonably competent and diligent solicitor (Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp (supra)). The test is that required of a person holding himself or herself out as someone who follows a skilled calling. As Windeyer J stated in Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84:
"He is bound to exercise due care, skill and diligence. He is not required to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual among architects practising their profession. And he must use due care. If he fails in these matters and the person who employed him thereby suffers damage, he is liable to that person. This liability can be said to arise either from a breach of his contract or in tort."
In this case, the defendant was employed to act in the transfer of a business. It represented itself, through Mr Fife, as having a particular expertise in that area of law. The standard of care and skill should not be limited to that possessed by a person of ordinary competence exercising the same calling. The standard of care should reflect the fact that within any one discipline, its practitioners have, or profess to have, varying degrees of expertise. The standard of care and skill required of such a person must bear some relationship to that expertise (Rogers v Whittaker (1992) 175 CLR 479; Duchess of Argyll v Beuselinck (1972) 2 Lloyds Rep 172). In this case, the findings of fact permit the conclusion that Mr Fife drew to the attention of the plaintiffs the risks attendant to the agreement which they had already signed. The question is whether, having alerted them to the issues, he provided them with a false sense of security or failed to make sufficient endeavours to rectify the problem.
Basis of advice
Following the signing of the contract in early October, Mr Ernst telephoned Fife, advised him of the transaction and told him that a contract would be forthcoming. The file note dated 4 October made by Fife records a telephone conversation advising that finance had been approved for an amount of $135,000. Mr Ernst states that shortly after that discussion he met with Fife and the two discussed the terms of the agreement. He says that at this meeting Fife told him that cl 19 was a standard form of covenant and only expressed concern in relation to cl 26. The Court accepts Ernst as an honest witness, but does not accept the accuracy of his recollection. Fife's account of the meeting differs significantly. He said that he expressed reservations about terms concerning the payment of the balance of the purchase money (cl 3 and cl 4), representations made by the agent (cl 11), the geographical area covered by the covenant (cl 19) and the question of work supplied by Artemis (cl 26). The parties were at that stage committed to a contract in terms similar to that originally executed in August 1993 but since lapsed. This is not a case dependent upon an assessment of conflicting oral testimonies. A file note (undated) was one prepared either in anticipation of or contemporaneous with the meeting. The portion relevant to the comments reads:
"4 Limitation on Trading
Too wide - without reference to distance
(Tasmania)
(
restraint of trade - under TP Act).5 Is there privity between Artemis Publishing Consultants and purchasers re warranty. Can vendor Creative Typographics P/L bind Artemis PC (even though agreement states v'dor company??"
The file note contradicts the following particulars pleaded in the statement of claim par8:
"During October 1993 there were three meetings between the first, second and thirdnamed Plaintiffs and Malcolm Fife at the offices of Glade-Wright & Co. The first of such meetings in early October 1993 was after Malcolm Fife had received and reviewed the contract of sale. Malcolm Fife advised the first, second and thirdnamed Plaintiffs that Clause 19 of the agreement for sale was '… a standard clause for restriction of trade …'. No further reference was made to this clause and no further legal advice in relation to it was given by Malcolm Fife to the first, second or thirdnamed Plaintiffs.
In relation to paragraph 26 of the contract of sale, Malcolm Fife indicated to the first, second and thirdnamed Plaintiffs that he had some concern with the terminology defining quality of work and service and stated that '… he would discuss this matter with the Vendor's solicitor …'".
The file note was made at or near the time of the meeting on 4 October. If anticipatory, it is inconceivable that no reference was made to the issues canvassed during the conference and, if contemporaneous, it is a narrative. The finding is that Fife advised Mr Ernst as to the limitations and impact of the covenants. Moreover, Fife was advising in relation to an agreement already made and any discussion required consideration of the need for any variation to be mutually agreed. Following the meeting, Fife contacted the vendor's solicitor and the two agreed that the contract was unsatisfactory and that the vendor would forward an amended copy. On 8 October, approval of finance was notified by the intended lender and second mortgagee. On 12 October, Fife and Ernst had a further telephone conference and the need for a further meeting was discussed. The vendor's solicitor forwarded an amended agreement in accordance with the earlier discussion. No substantive amendment had been made to the covenants as the following comparison indicates:
Original Amended "18 THE VENDOR will not at any time during a period of three (3) years from the date of completion of the purchase either solely or jointly with or as Agent for any firm or Company or indirectly or directly carried on or be engaged or concerned or interested as Principal Agent, Manager, Servant, Financier, or otherwise carry on within Tasmania the like trade or business now carried on by the Vendor.
…
25 It is a further condition precedent of this contract that the vendor's company, Artemis Publishing Consultants, its directors, managers, employees or agents warrant to place all work that Creative Typographics currently service and produce for Artemis in particularly the typesetting and computer graphic work components with Creative Typographics for a minimum of 1 year from the date of takeover. This condition is subject to the purchaser providing a standard of work, service and product currently enjoyed by Artemis."
"19 The Vendor covenants with the Purchaser that it shall not for a period of three (3) years from the actual date of completion of this Agreement either directly or indirectly or as principal agent employee or otherwise carry on or be concerned or engaged in the business of typesetting within Tasmania.
…
26 The Vendor shall cause its associated business, Artemis Publishing Consultants, to place all work that the Vendor currently services and produces for Artemis Publishing Consultants (in particular the typesetting and computergraphic work components) with the Purchaser for a minimum of One (1) year from the actual date of completion of this Agreement. This obligation of the Vendor shall be subject to the Purchaser, to the reasonable satisfaction of Artemis Publishing Consultants, providing a standard of work, service and product at least equivalent to that currently provided by the Vendor to Artemis Publishing Consultants and at prices no greater than that currently paid by Artemis Publishing Consultants to the Vendor for such work and services."
Fife said that he had requested an amendment to the old cl 25, but that the solicitor had refused to meet his request, other than to make the drafting more precise. Following that conversation, the vendor's solicitor wrote to Fife on 19 October noting the telephone conversation and the advice as to finance, adding:
"Given that it is proposed to effect settlement on 1st November 1993 we would appreciate early receipt of your comments in respect of the draft Agreement."
On that day, Fife met with his clients. Again, the accounts differ. Mr and Mrs Ernst claim that no advice was given to the effect that cl 19 and cl 26 were not binding on the vendors, or, more particularly, on Soundy and Shield. Fife says that the matter was raised but that the Ernsts were not interested in further modification, stating that they had trust in the vendors and did not anticipate trouble such as had been experienced with the previous vendor. He said that he advised them (and the intended mortgagee) that he did not believe that the covenant afforded much protection. The file note made no reference to cl 19 and in relation to cl 26 records:
"26 Ass business.
In event of dispute independent arb from industry acceptable to both
Comm Arb Act.
5 x 5 (not 3 x 3) but six months market review."
The reference to arbitration could only refer to the earlier cl 5(a), whilst the reference to numbers relates to the associated lease agreement. The file note confirms Fife's account that he again raised the question of covenants but that the purchasers were not interested in pursuing the matter, and the note recorded items which still required attention. Further discussion occurred between Fife and the vendor's solicitor who advised by letter dated 22 October:
"We refer to your telephone conversations with the writer on 20th October 1993 and enclose herewith Agreement for Sale for execution by your client.
We advise that the only clauses that have been amended are as follows:
Agreement for Sale - Clauses 8 and 26."
Following the return the amended agreement was executed by the plaintiffs on 25 October, exchanged on the following day and subsequently the transaction settled and registered.
The findings are that Fife drew to the attention of the plaintiffs the problems associated with the breadth of cl 19 and the question of privity in relation to cl 26 at the meeting on 4 October, and that he raised the question of amendment with the vendor's solicitor subsequent to that meeting. That solicitor agreed to make minor amendments only. Fife again raised his concerns with the plaintiffs on 19 October but they did not pursue the matter further since they had trust in the vendors. Following that meeting, Fife again raised the matter with the vendor's solicitor, but, apart from minor amendments to cl 8 and cl 26, no further variation was agreed by the vendor. At the time of the second meeting with the plaintiffs, Fife was aware, through a company search, that Soundy and Shield were both directors of Creative Typographics and partners of Artemis. At the second meeting he again raised his concerns and the following answers are accepted as an accurate account of the relevant exchange on that day:
"Right. Now, during the course of the meeting of the 19th of October were the matters which were raised on the 6th of October revisited? ... Yes, they were.
And in what way did that happen? … Well, because the - the contract still hadn't addressed the matter of the lack of - particularly a lack of privity in relation to Artemis Publishing Consultants, and that that was that which concerned me more than anything I think and we discussed it at some length and depth with Mr. Ernst.
Were you given any instructions to seek any concession or modification from the other side about this issue? … No, in fact. And when I tried to suggest that Mr. Ernst and like this is something that sticks very firmly in my mind, said, Look, we are not dealing with an Appleby, I trust these people implicitly. Or words to that effect, but certainly the reference to Appleby was verbatim.
MR BARKER: We've heard some evidence about Mr Appleby being something of a running sore in respect of the Taroona Hotel and Mr and Mrs Ernst? … Yes.
You're nodding? … Yes.
And was that something in which you'd had any involvement? … Yes.
So you understood his allusion to Mr Appleby? … Oh, very much. Yes, yes.
What effectively were your instructions at the end of the meeting on the 19th October, what were you to do? … To proceed with the matter and to finalise the finance and complete the matter."
It could fairly be said that Fife did not pursue his requests to the vendor's solicitor for amendments as forcefully as he could have done. But he was in the position of a person attempting to negotiate amendment to an existing contract. He had alerted the plaintiffs to the issues of privity and the geographic extent of the Restraint of Trade Clause. He had pursued the question of amendment with the vendor's solicitor. He obtained some modification, but not on the issues of substance. It was not for the vendor to make further concessions, despite the claimed preparedness of Soundy (made at trial) to do so. As Lord Hoffmann stated in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 at 214:
" … a person under a duty to take reasonable care to provide information on which someone else will decide upon a course of action is, if negligent, not generally regarded as responsible for all the consequences of that course of action. He is responsible only for the consequences of the information being wrong. A duty of care which imposes upon the informant responsibility for losses which would have occurred even if the information which he gave had been correct is not in my view fair and reasonable as between the parties. It is therefore inappropriate either as an implied term of a contract or as a tortious duty arising from the relationship between them.
The principle thus stated distinguishes between a duty to provide information for the purpose of enabling someone else to decide upon a course of action and a duty to advise someone as to what course of action he should take. If the duty is to advise whether or not a course of action should be taken, the adviser must take reasonable care to consider all the potential consequences of that course of action."
That decision of the House of Lords was not followed by the Full Court of the Federal Court of Australia in Kenny & Good Pty Ltd and Another v MGICA (1992) Ltd (1997) 147 ALR 568, and this generated some academic discussion (see summary of articles referred to by Davidson in (1998) 17 Australian Bar Review 69 at 82). However, in Kenny (supra), the Federal Court determined that if different advice had been provided, the aggrieved party would not have entered into the transaction and the decision depended in part on the provisions of the Trade Practices Act 1974 (Cth). The test stated by Lord Hoffman in Banque Bruxelles (supra) was accepted by McLelland CJ in Trust Co of Australia v Perpetual Trustees WA Ltd and Others (1997) 42 NSWLR 237.
The Full Court of the Federal Court has expressed reservations as to some of the implications of the decision in Banque Bruxelles in Amadio Pty Ltd v Henderson and Others (1998) 81 FCR 149. In that case, the court considered the degree to which a solicitor should be held responsible for commercial advice. In relation to the distinction between anticipatory advice and the duty of a solicitor in relation to a contract already executed, the court said, at 215:
"Senior Counsel for Nevett Ford next sought to draw a distinction between advice about the contract which was to be executed after the retainer had commenced and advice about the terms of the lease which was already in binding form. That submission was founded on this passage from the reasons of the trial judge (at 139):
'Once it is accepted that a solicitor is acting for a lay client in relation to a transaction involving, after the retainer commences, the execution of technical legal documents, it must follow in my opinion that the solicitor is obliged to explain and advise the client as to the effect of those documents.'
However, his Honour is not to be understood as holding in that passage that a solicitor's obligation to explain, and advise the client as to, the effect of legal documents arises only in respect of those documents which are to be executed after the solicitor has been retained. In the present case, as we have already pointed out, the draft contract of sale forwarded to Nevett Ford expressly recited that the property was subject to a lease and required the purchasers to acknowledge that they had inspected the lease and were satisfied with the terms and conditions in respect of it. In those circumstances, we consider that it was part of Nevett Ford's retainer to peruse the lease and advise their principals, either directly or through Gray & Winter or their accountants, of any unusual benefits which it conferred on the tenant or any unusual burdens or detriments which it imposed on the purchasers as landlords. In this respect, the obligation on Nevett Ford is not dissimilar from that undertaken by a solicitor for a purchaser to advise about the effect of a restrictive covenant notwithstanding that the contract pursuant to which it has been created long antedated the solicitor's retainer. We consider that the proposition enunciated by Harman LJ in Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 at 124 that:
'When a solicitor is asked to advise on a leasehold title it is, in my judgment, his duty to call his client's attention to clauses in an unusual form which may affect the interests of his client as he knows them'
applies no less when an existing lease is incorporated by reference in a proposed contract of sale than when a new lease is to be entered into by the client."
In this case, Fife provided advice and any assessment of the future integrity of the vendor or the partners of Artemis was a matter for the plaintiffs.
There remains one final issue of causation. The findings of fact do not include one specifically to the effect that the issue of privity in relation to cl 19 was raised by Fife at the first meeting. But it is for the plaintiff to establish on the evidence that negligent advice was provided at that meeting and, given the other findings, such has not been established. Neither does the evidence establish that the issue of privity was raised only in relation to cl 26. The evidence supports the conclusion that the question of enforceability against Soundy and Shield was raised generally and that Fife was not required to pursue the issue further. Had he been so instructed, the specific issue in relation to privity and cl 19 might have been clarified. If it had been specifically raised, there is no evidence that any variation would have been permitted other than a retrospective assertion (not accepted) by Soundy that she would have done so. But even assuming, for the purpose of judgment, that Fife did not specifically raise privity in relation to cl 19, the conclusion remains the same. The plaintiffs are required to prove that the negligent advice (or its absence) was causative of damage (Hall v Foong (supra); Hanflex Pty Ltd v N S Hope & Associates (supra)). The plaintiffs must prove that they could and would have acted differently on receipt of different advice before they can establish causation (Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Price Higgins & Fidge v Drysdale [1996] 1 VR 346).
Two limbs of the issue of causation were stated by Gaudron J in Chappel v Hart (1998) 156 ALR 517. The first is the requirement for a party to establish that a separate course would have been followed had different information been provided. As her Honour stated at 520:
"Where there is a duty to inform it is, of course, necessary for a plaintiff to give evidence as to what would or would not have happened if the information in question had been provided. If that evidence is to the effect that the injured person would have acted to avoid or minimise the risk of injury, it is to apply sophistry rather than common sense to say that, although the risk of physical injury which came about called the duty of care into existence, breach of that duty did not cause or contribute to that injury, but simply resulted in the loss of an opportunity to pursue a different course of action."
The second is whether it has been established that a failure to inform is causally related to the injury sustained. In this case, the existence of the contract before advice was provided by Fife, the general reference to the issue of privity and enforceability, the attempts at renegotiation and the instructions given by the clients preclude a finding of causation in the terms discussed by the majority of the High Court in Chappel v Hart (supra). Unless causation can be established, no damages can be recovered in tort and only nominal damages permitted in contract. In this case, the plaintiffs had entered into an agreement before they had consulted the defendant. They have not shown that amendment to the contract could have been achieved even if they had requested variation. Given the findings in relation to the question of privity and cl 26, they have not shown that had the issue of privity been raised along with geography, specifically in relation to cl 19, then they would have acted differently.
Conclusion
This is not a case where a solicitor provided advice before entry into contract. The defendant was responsible for the provision of advice as to the consequences of a contract already made and for attempting re-negotiation. He complied with both obligations to the requisite standard. The action of the plaintiffs is dismissed.
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