Cusmano, Francesco v Pinner, Neville
[1998] FCA 927
•5 AUGUST 1998
FEDERAL COURT OF AUSTRALIA
TRADE PRACTICES - NEGLIGENCE - CONTRACT - vendor of commercial property agreed to transfer benefit of fire and general insurance policy over that property to purchaser - policy had about eleven months to run - vendor contacted insurer’s agent and requested arrangements be made - agent asked that purchaser contact him - property at risk of vendor until settlement - settlement took place without insurance arrangements being made - some contact made with insurer’s agent during ensuing months - no insurance arranged for purchaser - premises destroyed by fire - insurer refused to indemnify purchaser - whether insurer’s agent and insurer had engaged in misleading or deceptive conduct - purchaser had retained settlement agent to attend to completion of contract of sale and registration of transfer - whether settlement agent owed either contractual or tortious duty of care in respect of insurance of the property - whether duty of settlement agent co-extensive with that of a solicitor so retained.
Trade Practices Act 1974 (Cth), s 52
Tiffin Holdings Ltd v Millican (1965) 49 DLR (2d) 216 referred to
Neagle v Power [1967] SASR 373 referred to
Jennings v Zihali-Kiss [1972] 2 SASR 493 referred to
Fitzpatrick v Parker Butterworths Unreported Judgment No. BC9604831 referred to
Georgieff v Athans (1981) 26 SASR 412 referred to
Luciano v D G Pty Ltd (1981) 25 SASR 568 referred to
Fox v Everingham (1983) 76 FLR 170 referred to
Hawkins v Clayton (1988) 164 CLR 539 referred to
Macindoe v Parbery (1994) 6 BPR 13,483 referred to
The Green Team (WA) Pty Ltd v Brulee Pty Ltd(1995) Aust Torts Reports 81-362 followed
Sande v Registrar, Supreme Court of Queensland (1996) 134 ALR 560 referred to
FRANCESCO CUSMANO v. NEVILLE PINNER, MLC INSURANCE
LTD, ASCOT REALTY PTY LTD and FRANCESCO SCALI
No. WAG 54 of 1996
CARR J
PERTH
5 AUGUST 1998
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 54 of 1996
GENERAL DIVISION
BETWEEN:
FRANCESCO CUSMANO
ApplicantAND:
NEVILLE PINNER
First RespondentMLC INSURANCE LTD (ACN 000-248-073)
Second RespondentASCOT REALTY PTY LTD (ACN 008-892-573)
Third RespondentFRANCESCO SCALI
Fourth RespondentJUDGE: CARR J DATE OF ORDER: 5 AUGUST 1998 WHERE MADE: PERTH
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The applicant’s motion, notice of which was filed on 12 May 1998 be dismissed with costs.
The application be dismissed.
The applicant pay the respondents’ costs of the application.
Any party have liberty to apply in relation to matters of taxation of costs of the type raised today by counsel for the third and fourth respondents.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 54 of 1996
GENERAL DIVISION
BETWEEN:
FRANCESCO CUSMANO
ApplicantAND:
NEVILLE PINNER
First RespondentMLC INSURANCE LTD (ACN 000-248-073)
Second RespondentASCOT REALTY PTY LTD (ACN 008-892-573)
Third RespondentFRANCESCO SCALI
Fourth Respondent
JUDGE: CARR J DATE: 5 AUGUST 1998 PLACE: PERTH
REASONS FOR JUDGMENT
INTRODUCTION
In February 1993 Mrs Stella Phoebe Squire, a widow then aged about 76 and a resident of Perth, was the registered proprietor of a commercial property in the township of Harvey, about 150 kms south of Perth. The property comprised three shops and a workshop, each of which was tenanted. As a matter of convenience, I shall refer to that property as “the Building”. In late 1992 Mrs Squire had entered into negotiations to sell the Building to a Mr Sebastiano Cusmano and his wife Mrs Maria Grazia Cusmano. I shall refer to them as Mr and Mrs Cusmano (senior). Mr and Mrs Cusmano (senior) lived in Harvey and were old friends of Mrs Squire. They also owned a farming property near Harvey. Mrs Squire had for many years lived in Harvey until the death of her husband approximately 20 years ago. Those negotiations did not result in the sale of the Building to Mr and Mrs Cusmano (senior). However, in January 1993 there occurred further negotiations for the sale of the Building to Mr Francesco Cusmano, the applicant in these proceedings, who is the son of Mr and Mrs Cusmano (senior). Those further negotiations resulted in the execution of a contract for the sale of the Building to the applicant. It would seem that Mrs Squire signed that contract on 25 February 1993. The purchase price was $180,000. The applicant borrowed the whole of that sum from Australia and New Zealand Banking Group Ltd (“the Bank”). Settlement of the transaction took place on 18 March 1993, as a result of which the applicant became the registered proprietor of the Building, subject to a registered first mortgage to the Bank. The moneys payable pursuant to that mortgage were further secured by a guarantee mortgage registered over the farm then owned by Mr and Mrs Cusmano (senior). As will be seen below, it is part of the applicant’s case that, during the negotiations which led to the contract of sale, Mrs Squire and the applicant reached an agreement whereby Mrs Squire would “transfer” to the applicant a fire insurance policy over the Building, issued to her by MLC Insurance Limited (“MLC”), the second respondent. That policy had been renewed on or about 7 January 1993 for a period of 12 months. It is common ground that the policy of insurance was not transferred to the applicant, nor was any other relevant insurance policy ever issued to him. On 11 September 1993 the Building was severely damaged by fire. The obligation of the tenants to pay rent was suspended and later lapsed when the Building was demolished.
THE NATURE OF THE PRESENT PROCEEDINGS
The applicant seeks damages against Mr Pinner and MLC under s 52 of the Trade Practices Act 1974 (Cth) when read with sections 51A, 75B(1) and 82 of that Act. The applicant also seeks damages against the first respondent, Mr Neville Pinner, under ss 9 and 10 of the Fair Trading Act 1987 (WA).Mr Neville Pinner, has for nearly 30 years been MLC’s agent in the Harvey area. The applicant seeks damages for breach of contract and/or negligence against the third respondent and damages for negligence against the fourth respondent. The third respondent was at all material times registered as the proprietor of the business name “Ascot Settlements”. The fourth respondent was at all material times a director of the third respondent and was the person who acted for the applicant in the completion of the contract of sale and at settlement.
In the statement of claim (paragraph 7) the applicant pleads two express oral representations said to have been made by Mr Pinner. The first express representation was that in about the second week of February 1993, at Mr Pinner’s home in Harvey, Mr Pinner told Mr Cusmano (senior) that he had been requested by Mrs Squire to transfer the existing policy of insurance over the Building to the applicant and that he was “fixing everything up”. The applicant also pleads a second express representation, said to have been made to him by Mr Pinner after the fire (on 29 September 1993) that the “insurance papers had been sent to Stephen Tarr at MLC Perth and were being attended to”.
The applicant also relies on a series of oral enquiries to which, so he alleges, there were no responses. I refer to those alleged oral enquiries in some detail below. The applicant pleads that “in the context and in the light of the representations [the two express representations referred to above] this silence by [Mr Pinner] and his failure to advise of the existence of any difficulty or objection to the transfer or assignment of the policy constituted representations that the transfer or assignment would be effected and was proceeding through routine channels”. The applicant says that MLC knew or is to be regarded as knowing of the representations said to have been made by Mr Pinner. The applicant further says that Mr Pinner’s conduct was, in the circumstances the conduct of MLC and that MLC is vicariously responsible for Mr Pinner’s actions and omissions in relation to the proposed transfer or assignment of “this insurance cover” to the applicant. He says that the conduct of Mr Pinner and MLC, which I have just summarised, was misleading and deceptive in that it induced a belief and an expectation by the applicant that:
.the policy of insurance between Mrs Squire and MLC against fire and other risks could and would be transferred or assigned to him;
.there were no obstacles or impediments to that transfer or assignment and that such transfer or assignment would occur as a matter of routine;
.the transfer or assignment was being arranged by MLC and that appropriate insurance documents would soon be issued to him;
.the applicant at all times had the benefit of cover for fire and other risks which that policy provided; and
.there was no need to arrange further or other insurance against fire or other risks to the Building while the transfer or assignment of the policy was being processed.
The applicant says that, further and in the alternative, Mr Pinner was directly and knowingly concerned in the misleading and deceptive conduct of MLC by making the above representations on its behalf knowing they were untrue or without reasonable grounds for making any of them.
The applicant further pleads that on or about 28 January 1993 he engaged the third respondent, Ascot Realty Pty Ltd (“Ascot”) for reward to act as his settlement agent to do all things necessary to achieve completion of the contract and to see to the preparation and registration of a transfer of an estate in fee simple in the land and premises to him. Ascot is a duly licensed real estate agent and land settlement agent under the two sets of relevant State legislation. The fourth respondent, Mr Francesco Scali, was (as I have mentioned) a director of Ascot and, also, a licensed real estate salesman and settlement agent under the same legislation. Mr Francesco Scali (I shall use his given name to distinguish him from Mr Anthony Scali, his brother who gave evidence in this matter) conducted the settlement and all incidental matters. The applicant pleads, identically, certain contractual obligations on the part of Ascot and a duty of care owed to him by both Ascot and Mr Francesco Scali (paragraph 14). I set out below in detail how the applicant particularises that duty of care. The applicant pleads breach of contract by Ascot and negligence on the part of both Ascot and Mr Francesco Scali in failing to observe those contractual obligations and that duty of care.
There are the following further pleas in the statement of claim:
.that on 11 September 1993 the Building was so damaged by fire as to render it unfit for occupation and use and to require its demolition;
.that MLC has refused to acknowledge any liability to indemnify the applicant for the losses caused by the fire and the destruction of the Building, on the grounds that:
(a)it had no contract of insurance with the applicant;
(b)at the time of the loss, the benefit of its policy with Mrs Squire was not transferred or assigned to the applicant; and
(c)there was no obligation on it to transfer or assign the benefit of that policy to the applicant; and
.that as a result of the misleading or deceptive conduct of Mr Pinner and MLC and, further and in the alternative, as a result of the breach of contract and negligence of Ascot and the negligence of Mr Francesco Scali, he has suffered loss and damage.
The loss and damage is currently particularised as comprising two components. The first component is described as the reinstatement value of the premises including demolition and other costs, being a figure of $210,433.00. The second component is loss of rent from tenants from 11 March 1994 until 24 February 1996 in an amount of $47,131.23 making a total of $257,564.23. The applicant pleads that but for the oral express representations pleaded in paragraph 7 of the statement of claim he would have entered into a policy of insurance with Commercial Union Insurance, the terms of which would have covered the losses which he has suffered. The applicant has moved to add, by amendment to the statement of claim, a further claim for relief arising out of his potential liability to certain of the former tenants of the Building. Those tenants have sued the applicant in the District Court of Western Australia for damages arising out of losses which they claim to have sustained by reason of the fire which resulted in the demolition of the Building. Those District Court proceedings have not yet been heard. That motion has (by consent) been stood over until the delivery of these reasons.
MR PINNER’S DEFENCE
In summary, Mr Pinner admits that he was a duly appointed agent of MLC for the Harvey region and that he was authorised to canvass for proposals for general insurance on behalf of MLC and to submit proposals for insurance to MLC for its consideration. Mr Pinner admits that he told Mr Cusmano (senior) at his (Mr Pinner’s) home in Harvey in or about mid February 1993 that he had been telephoned by Mrs Squire regarding the Building and that he would have to speak to the applicant regarding the matter. Mr Pinner pleads that he unsuccessfully attempted to telephone the applicant on three separate occasions in the week following that conversation, to discuss the matter. Next, on behalf of Mr Pinner, it is pleaded that after those attempts and in the course of a telephone conversation with Mr Pinner’s wife a person (who described himself as the applicant’s cousin and an insurance broker, but who did not leave his name or telephone number and said that he would ring back, but did not do so), told Mrs Pinner in about mid 1993 that he was arranging the applicant’s insurance and requested details of the insurance policy relating to the Building, which she was unable to provide. Mr Pinner pleads that apart from these contacts, neither the applicant nor any other person purporting to act on his behalf ever contacted him or his wife regarding the matter of insurance before the fire. In essence, Mr Pinner denies any misleading or deceptive conduct.
MLC’S DEFENCE
MLC, while admitting that Mr Pinner was its agent “for certain purposes”, denies that he had the authority or capacity pleaded in the statement of claim. It further denies that it knew or is to be regarded as knowing of the representations alleged to have been made by Mr Pinner or that communications with Mr Pinner also constituted communications with MLC and it denies being vicariously responsible for the actions and omissions of Mr Pinner. MLC says that it was entitled to deny liability to indemnify the applicant. MLC further denies that Mr Pinner purported or attempted to transfer the relevant insurance policy from Mrs Squire to the applicant and says that, in any event, any such transfer or purported transfer would have been ineffective as it was not the practice of MLC to effect a transfer of policies from one named insured to another named insured.
CROSS-CLAIM
MLC cross-claims against Mr Pinner in the event that it is held liable to the applicant. The basis of the cross-claim is alleged breach of the terms of an agency agreement made on 8 October 1991 between MLC and Mr Pinner. Mr Pinner defends the cross-claim.
DEFENCE OF ASCOT AND MR FRANCESCO SCALI
In summary, Ascot and Mr Francesco Scali deny that the applicant retained Ascot as his settlement agent (I return to that matter below) and plead that Mr Francesco Scali was retained for that purpose. In their amended defence they set out the matters which Mr Francesco Scali was engaged to perform as settlement agent and say that he duly performed those obligations. They deny that either in contract or as a matter of negligence Mr Francesco Scali was under the duties of care in relation to the matters of insurance which the applicant pleads and which I have summarised above. In the alternative, Ascot and Mr Francesco Scali say that if they were in breach of contract or negligent as alleged, the applicant did not suffer any loss or damage as a result thereof. By way of particulars, they refer to the fact that the applicant was already aware of the need to obtain insurance of the Building during the negotiations leading to the contract of sale. They say further that at all times up to the time of the fire the applicant was looking to Mr Pinner to assist him in bringing about that insurance. Finally, Ascot and Mr Francesco Scali plead that any loss sustained by the applicant was caused wholly or in part by the applicant’s negligence in failing to attend to the matter of insurance of the Building.
FACTUAL FINDINGS
The arrangement between the applicant and Mrs Squire
I find that during the course of negotiations between Mrs Squire and the applicant in January or February 1993, Mrs Squire agreed that, as part of the transaction, the applicant was to have the benefit of her insurance arrangements i.e. that in one way or another the insurance policy would be transferred into his name and he would have the benefit of the premium paid by Mrs Squire (or quite probably by her tenants on her behalf) for the period ending on or about 7 January 1994. I accept the applicant’s evidence that during the course of those negotiations (see p 39 of the transcript) Mrs Squire, as an inducement to the applicant to meet her price, referred to flooring and electrical work which had been carried out and also to the fact that the insurance had just been renewed for another year. There would be very little point in mentioning this if she intended to cancel the policy and obtain for herself a refund of the premium. It is true that Mrs Squire denied such an arrangement, but my impression of Mrs Squire is that, due to the effect which age has had on her memory, it would be unsafe to rely upon anything given in evidence by her.
The fact of such an arrangement is consistent with the applicant’s evidence of his response to his bank manager Mr Anthony Scali (the fourth respondent’s brother) when the possibility arose of the bank arranging insurance of the Building. It is also consistent with Mr Anthony Scali’s evidence that he recollected that there was some kind of arrangement concerning insurance.
Mr Pinner said (and I believe him) that Mrs Squire telephoned his home in early 1993 and left a message with his wife asking that he return the call. He said that he rang her telephone number for the first time on that day, but was unable to contact her. He tried the following day and spoke to Mrs Squire. He said that Mrs Squire said to him “I’ve sold the building to Frank Cusmano and I would like him to be covered”. Mr Pinner denied that Mrs Squire wanted Mr Cusmano to have the benefit of the cover (see p 253 of the transcript). Whilst I accept Mr Pinner’s evidence generally, I do not accept his evidence on this particular point. I think that it is more probable than not (and I so find) that Mrs Squire told Mr Pinner that she had sold the Building to Mr Cusmano, that she would like him to be covered and that she would like him to have the benefit of the existing insurance. I find that in response, Mr Pinner told Mrs Squire that Mr Cusmano would have to contact him (Mr Pinner) because the business would have to be re-written. This latter finding is supported by the evidence of what took place when the applicant drove Mrs Squire to Harvey to meet the tenants of the Building.
I find that on that occasion (the visit to Harvey) Mrs Squire informed the applicant that it was necessary for him to contact Mr Pinner to arrange for the “transfer” of the insurance. This was either during the course of the journey to Harvey in late February or early March 1993 or at lunch at the Cusmano family home in Harvey on the occasion of that visit. I accept the applicant’s evidence (p 51) that Mrs Squire told him on that occasion that she had contacted Mr Pinner and that Mr Pinner required his details. I find that at the lunch Mr Cusmano (senior) wrote his son’s name and address down on a sheet of paper [which became Exhibit 1R1(i)] and either Mr Cusmano or Mr Cusmano (senior) wrote on that sheet of paper the applicant’s telephone number in Perth and (twice) the applicant’s pager number in Perth. At pp 71-72 the applicant identified the handwriting (other than the telephone numbers) on that document as being his father’s. He was not sure in whose handwriting the telephone numbers were. In any event, either he or his father wrote in those telephone numbers. Another telephone number which appears on this sheet of paper was identified as being the telephone number of Mr and Mrs Cusmano (senior) in Harvey. I shall come to the question of how that telephone number came to be written on that document shortly.
On the following day (a Saturday) Mr Cusmano (senior) went to Mr Pinner’s home and spoke to Mr Pinner. I accept that something was said by Mr Pinner to Mr Cusmano (senior) to the effect that he (Mr Pinner) had heard from Mrs Squire about the proposed transfer of the benefit of her insurance policy to Mr Cusmano. Mr Cusmano (senior) said (at p 147) that this was in the following terms:
“I know everything because Mrs Squire rung me - put, transfer the insurance to your son,”
I find that Mr Pinner on that occasion told Mr Cusmano (senior) that Mrs Squire had telephoned him about arranging for the insurance for the Building to be in the applicant’s name or words to that effect. Given my findings about Mrs Squire’s telephone call to Mr Pinner, I think it is inherently likely, in all the circumstances, that Mr Pinner would have said this. I do not think that there is any relevant difference between that finding and that portion of Mr Cusmano (senior’s) evidence which I have set out immediately above, save for the reference to “I know everything”. In that regard, I do not think it is likely that Mr Pinner said that he “knew everything”. It is clear that he wanted information from the applicant.
I find further that Mr Cusmano (senior) replied to the effect that he wished to give Mr Pinner his son’s telephone numbers in Perth, and that he in fact gave Exhibit 1R1(i) to Mr Pinner on that occasion. I find that Mr Pinner said that he would telephone the applicant. I accept Mr Pinner’s evidence (p 241) that, as Mr Cusmano (senior) walked away he said words to the effect that his son was always working and hard to catch. I accept also, as being (again) inherently likely, Mr Pinner’s evidence that on that occasion he (Mr Pinner) wrote on that exhibit Mr and Mrs Cusmano (senior’s) Harvey telephone number. If Mr Pinner were to have difficulty in contacting the applicant (as turned out to be the case and as Mr Cusmano (senior) was foreshadowing) it would be most probable that Mr Pinner would either ask for or be given a local contact telephone number.
A key question for me to resolve is whether, as Mr Cusmano (senior) swore, Mr Pinner said “I will fix everything up” or “I’ll do everything”. Mr Pinner, in evidence-in-chief, gave a different version of the conversation which did not include those key phrases “I’ll fix everything up” or “I’ll do everything”. Those phrases were not put to him in cross-examination by counsel for the applicant. Furthermore, Mr Pinner wrote a letter dated 29 September 1993 to MLC’s Sydney head office setting out his recollection, at that time, of what had taken place on the occasion of the visit of Mr Cusmano (senior). That letter was written some six months after the events in question. I prefer Mr Pinner’s evidence of what took place and I do not believe Mr Cusmano (senior’s) evidence that Mr Pinner said words to the effect “I will fix everything up” or “I’ll do everything”.
I do not suggest that there is anything inherently improbable in the suggestion that an insurance agent in the abovementioned context might say something to the effect of “I will fix everything up”. However, I formed a most favourable impression of Mr Pinner when he was in the witness box. He is a man who, through force of circumstances, was obliged to leave school at a relatively early age. After being employed initially in the Post Office and then in two other positions of increasing responsibility, he became an MLC agent in January 1969. He has been an agent for MLC ever since. I formed the impression that Mr Pinner was not the sort of person who would unilaterally undertake a commitment of the type alleged. When told by Mrs Squire that she would like the applicant to have the benefit of the existing insurance, he responded by saying that the applicant would have to contact him. Mr Pinner knew that such contact had to be made before fresh insurance arrangements could be put in place. He was then given some contact telephone numbers and told that the applicant was “hard to catch”. I think that in those circumstances it is more likely that Mr Pinner would have given an undertaking to try and telephone the applicant than an undertaking in terms of “I will fix everything up”. On the contrary, he wrote down Mr and Mrs Cusmano (senior’s) Harvey telephone number, on my assessment of the situation, in case he was unable to contact the applicant.
There are other reasons why I prefer Mr Pinner’s evidence to that of Mr Cusmano (senior) on this point. First, I refer to some very significant amendments made to the statement of claim which were foreshadowed virtually on the eve of the trial. In paragraph 7(b) of the statement of claim prior to those amendments, the applicant pleaded that Mr Cusmano (senior) visited Mr Pinner’s home in Harvey in or about late March 1993 “to enquire whether the policy had been assigned and if so to ask for a copy to be produced”. It was alleged that Mr Pinner then told Mr Cusmano (senior) (who was said to have relayed the advice to the applicant) “that the transfer of the policy was still being fixed up and that [Mr Pinner] would send a copy of the policy when it was finished”. It must be noted that, in the circumstances of this case, this was an allegation of express representations of a fundamental nature. Paragraph 7(c) of the statement of claim originally pleaded a further enquiry made by Mr Cusmano (senior) at Mr Pinner’s home in Harvey in about April or May 1993 when, so it was alleged, Mr Pinner told Mr Cusmano (senior) (who relayed the advice to the applicant) “that the transfer of the policy was being attended to”. This was also an allegation of fundamental importance. These two paragraphs were deleted from the statement of claim by leave granted on the first day of the hearing. The applicant, in his evidence (p 88), agreed that his father had changed his story. On the other hand, Mr Cusmano (senior) denied any change of his position in relation to his contact with Mr Pinner. I acknowledge that it is possible that the applicant misunderstood the communications from his father or perhaps embellished his case when giving instructions to his solicitors. I interpolate here that the applicant has retained three different firms of solicitors to assist him with the resolution of the problems presented by the destruction of the Building by fire. However, I accept the applicant’s evidence that his father told him that he had made not one, but three, visits to Mr Pinner’s home, but subsequently changed his story and confined his evidence to one such visit. I think that this change of position in relation to his contact with Mr Pinner seriously undermines Mr Cusmano (senior’s) credibility. Furthermore, it was common ground on the applicant’s side that Mr Cusmano (senior) in 1993 had hearing difficulties. I take into account also the fact that both Mr and Mrs Cusmano (senior) attended on Mr Pinner on the Monday following the fire and, in no uncertain terms, blamed him for the fact that the Building had been destroyed without insurance. Not unnaturally, they must be regarded as having an interest very closely allied to that of the applicant. Not surprisingly, Mr Cusmano (senior) has no note or contemporaneous record of his discussion with Mr Pinner other than, of course, Exhibit 1R1(i). On the other hand, there is Mr Pinner’s letter of 29 September 1993 to Mr Anthony Slater of MLC’s Sydney office. I accept that this is scarcely a contemporaneous record, but at least it was written only some six months after the event in question. I appreciate the possibility that Mr Pinner might well have an interest in putting his actions in the best possible light. But it emerged in evidence that Mr Pinner has professional indemnity insurance and that his insurers are indemnifying him in relation to the matters raised in these proceedings. After weighing these various factors, I have decided that I may place some weight (and I do) on that letter. I refer to the following passages in particular:
“Mrs Squire contacted me regarding the above saying she had sold the building to Mr Cusmano and he wanted cover. I said it had to be re- written and it could not be just changed over to his name. A few days later Frank Cusmano (sic) father came to my home with his sons phone no (who lives in Perth) asking me to phone his son. I tried on approx (3) occasionss (sic) to phone him in Perth and was unsuccessful. I then thought if he wanted the ins cover it was his duty to contact me or Perth office.
A week or so later my wife received a phone call from Mr Cusmano (sic) Cousin in Perth saying he was his insurance broker and wanted figures saying he was going to do his business. I naturally assumed he had written the business as Mr Cusmano had never contacted me.”
In short, I prefer Mr Pinner’s version of what took place on the only occasion when he met Mr Cusmano (senior) i.e. that what he was asked to do on that occasion, and what he agreed to do, was to telephone the applicant with a view to arranging insurance cover for him.
THE CONVERSATION BETWEEN THE APPLICANT AND MR PINNER ON
29 SEPTEMBER 1993
It should be remembered that this telephone conversation is alleged to have taken place some eighteen days after the fire. In paragraph 7(d) of the statement of claim it is alleged that the applicant, on 29 September 1993, telephoned Mr Pinner and that during the course of that telephone conversation Mr Pinner said “that the insurance papers had been sent to Stephen Tarr at MLC Perth and were being attended to.”
In my view, the only possible relevance of this allegation might have been as an admission or as a matter going to credibility. However, the applicant’s own evidence-in-chief does not bear out the allegation. At p 56 the applicant said that he asked Mr Pinner what was happening with the insurance papers and that Mr Pinner said “they are all in Perth. Could you please contact a Mr Tarr”. In my opinion this particular of allegedly misleading or deceptive conduct and the evidence given by the applicant are quite incapable of supporting that allegation.
WHETHER THE APPLICANT TRIED TO CONTACT MR PINNER
Over an objection from senior counsel for MLC (which I overruled), the applicant gave evidence that at a time between March and May 1993 he telephoned Mr Pinner’s number in Harvey and left a message with a lady. The message was “Frank is my name. Could you get Mr Pinner to call me please”. Mr Cusmano said that he left a telephone number. Mrs Pinner, in her evidence, denied taking any such message. It is possible that some other member of the family took the message. I find on a balance of probabilities that the applicant did contact the Pinner household and leave such a message. I return below to the slight significance which I place on the fact of that telephone contact.
WHETHER MR AND MRS CUSMANO (SENIOR) MADE ORAL ENQUIRIES OF
MR PINNER
In paragraph 8(b) of the statement of claim it is alleged that Mr and Mrs Cusmano (senior) made oral enquiries of Mr Pinner in Harvey during the period May to August 1993 when they asked Mr Pinner to produce the policy documents. There is simply no evidence to support that allegation and I reject it.
“COUSIN FRANK”
The applicant had a first cousin, also called Francesco Cusmano, who has been referred to in these proceedings as “Cousin Frank”. There is reference to Cousin Frank in the extract of the letter dated 29 September 1993 from Mr Pinner to Mr Slater of MLC’s Sydney office. Cousin Frank was a life insurance sales agent for a company which he described as “National Mutual”. He has also been authorised, in recent years, to obtain proposals for general insurance on behalf of Commercial Union Assurance Company of Australia Limited (“Commercial Union”). The applicant gave evidence that he received a letter from his bank requesting a copy of the insurance policy in respect of the Building. I take that letter to have been a letter dated 31 March 1993 from the ANZ Bank’s Lending Centre at Osborne Park, being Exhibit A9 (see also pp 52-53). The applicant’s evidence was to the effect that upon receipt of that letter he immediately called his father and asked him to see Mr Pinner again to find out what had happened. He said that his father told him that he had tried to do so on several occasions but could not find him at home. Then the applicant said that at some time in April 1993 he had occasion to see Cousin Frank in relation to arranging some life insurance. He said to Cousin Frank “I need a copy of the insurance for the bank and I can’t get it. Could you find out what’s happening?” (see pp 55-56). There then occurred the following exchange in the applicant’s evidence-in-chief:
“Yes, I see, now, did your Cousin report back to you? --- On several occasions and said, “I’ve a (sic) left a number. Nobody called back.”
Did he report any positive contact with Mr Pinner? --- Yes. At one stage he said “yes” I’ve contacted (him? - indistinct). Everything’s in hand. Everything’s been done.”
So having been told that, what did you do? --- Well, that was it.
You didn’t do anything? --- No.
Well --- Yes you saw no need to do anything? --- No.”
Cousin Frank’s evidence differed from the above. His evidence (see p160-161) was to the effect that he never spoke to Mr Pinner before the fire. This evidence was in marked contrast to the description provided by Mr E M Heenan QC, counsel for the applicant, in his opening address of what Cousin Frank’s evidence would be. This is what I was told:
“Then Cousin Frank succeeded in communicating with Mr Pinner and explained that he was anxious to find out what was happening about the insurance. He was told that the policy was being transferred, what was the position itself, and he got a reassuring answer that the papers were being attended to and it would just be a matter of time. I don’t suggest those were the actual words, but that was the substance of the reply.”
In his evidence-in-chief (at pp 157-158) Cousin Frank said that he had telephoned the Pinner telephone number three or four times over a period of about a month. On one occasion he spoke to a lady. He said that he explained to her that he was Frank Cusmano’s cousin and asked that Mr Pinner fax to him “the schedule of the insurance” as he had to pass it on to the bank. He asked if Mr Pinner could give him a call regarding the whole insurance situation and that he (Cousin Frank) “wasn’t a threat to take over the insurance or anything like that.” I must say that I was unimpressed by Cousin Frank’s evidence. He presented as a witness who was glib and at the same time exhibited an untoward casualness and slickness. I made allowances for the fact that he might have been nervous in the witness box. I infer that Cousin Frank was the source of the allegation in paragraph 8(c) of the statement of claim that he (Cousin Frank) telephoned Mr Pinner at his home in Harvey in about July or August of 1993 and asked about progress in the transfer of the policy and requested delivery of the policy documents. In my view Cousin Frank’s evidence does not establish that allegation. While I had some reservations about some of Mrs Pinner’s evidence I am confident that I can rely on Mr Pinner’s evidence of what his wife relayed to him after having taken the message from Cousin Frank. Mr Pinner’s evidence was as follows:
“Can you relate that to his Honour? --- I came home one evening on a Saturday, Saturday evening after golf, and my wife said that a man rang from Perth who described himself as Frank Cusmano’s cousin who was a broker. She said to me, “He asked me for details of Mrs Squire’s policy.” She said to me, “I told him I didn’t know anything about my husband’s business and I didn’t know anything about Mrs Squire’s policy.” She also said to me that she thought that there was someone in the background prompting him when he was asking for details. I think she even said that he asked what the building was insured for, did she know - in the early part of the conversation - the amount the building was insured for. I said, “Did he leave a phone number?” She said “No.” I said, “Did he say he would ring back?” She said “No.” She said “I told him that if he wanted to know any details, then he would have to ring back and speak to my husband.”
Did you have any way of contacting that caller at that time? --- No.”
The applicant raised no objection to the admissibility of the above evidence. This may well have been because it was part of his case (see the last three lines of paragraph 8 of the statement of claim) that Mrs Pinner passed on Cousin Frank’s message to her husband.
I find that there was a message left by Cousin Frank with Mrs Pinner which she passed on to Mr Pinner along the lines that he was Mr Cusmano’s cousin, was an insurance broker (this would explain Cousin Frank’s reference to not being “a threat to take over the insurance”) and that he raised some inquiry about the fire cover for the Building. I find that the message ended on the basis that Cousin Frank would telephone again. Bearing in mind my inference that Cousin Frank was the source of the plea in paragraph 8(c) of the statement of claim and the impression (which I have described above) which I formed about Cousin Frank’s evidence, I find that it is quite likely that Cousin Frank gave the applicant some sort of assurance along the lines referred to at p 56 of the applicant’s evidence-in-chief, which I have set out above. If he did so, that assurance had no factual basis. Cousin Frank, on his own evidence, had no basis for telling the applicant that he had contacted Mr Pinner and that “everything is in hand. Everything’s been done”.
To the extent that the applicant relies in his statement of claim on an alleged oral inquiry by Cousin Frank of the type particularised in paragraph 8(c) I do not accept that there was an inquiry of the type particularised. Nor do I accept that this allegation added anything to the general allegation of silence constituting representations of the type described in the body of paragraph 8 of the statement of claim.
THE CONVERSATION BETWEEN MRS CUSMANO (SENIOR) AND MRS PINNER
ON 9 AUGUST 1993
Paragraph 8(d) of the statement of claim contains an allegation that on 9 August 1993 Mrs Cusmano (senior) made an inquiry on behalf of the applicant at Mrs Pinner’s haberdashery shop in Harvey. The allegation is that Mrs Cusmano (senior) complained “that the insurance papers had still not arrived and requested that Mr Pinner call at her house to discuss the matter”.
As between Mr Pinner and the applicant it is common ground that there was a communication between Mrs Cusmano (senior) and Mrs Pinner on 9 August 1993, being the Thursday before the fire. Mrs Cusmano (senior’s) evidence was that she said to Mrs Pinner:
“Mrs Pinner, my husband tried to contact your husband. He never home, nor in the morning or in the night or in the day,” and she said, “He’s very hard to catch my husband. What do you want?” I said, “About the insurance for my son shop. Please contact my son or my husband ---” (see p 138).
Mrs Cusmano (senior) repeated this evidence at p 140 as follows:
“Mrs Cusmano, would you tell us what you said to Mrs Pinner?” --- Yes, I said, “Please tell your husband to contact my son or my husband because we try so many time and we no find him home,” and she said, ‘Yes, I tell him”. She write something in a piece of paper, I don't know what she write, because she was the other side of the counter, and she put on the counter and put something on top.
Did you tell her why you wanted Mr Pinner to get in touch with you? --- “Yes, for about the insurance of the shop for my son” (see p 140).
At p 144 there was the following exchange:
“I suggest to you you said to Mrs Pinner, my son’s overseas and he wants to know when he pay his insurance? --- “I not remember that”.
You could’ve said it, but you don't remember it? --- No, I not remember if I said that.
You might’ve said it, you just don't remember? --- I not remember.
She said to you, “I’ll give your message to Neville?” --- Yes.
Did you say anything in that conversation, before the fire, at the shop about insurance papers? --- No. I don’t understand much about the insurance or things. I just say to contact my husband or my son.
Did you say can Mr Pinner call at your house to discuss the matter? --- Yes, or ring up.
Do you remember saying that? --- Yes”.
It is to be noted that there is no reference in the evidence of Mrs Cusmano (senior) to any complaint about the insurance papers still not having arrived. I find that Mrs Cusmano simply asked Mrs Pinner to relay a message to Mr Pinner that he contact either Mr Cusmano (senior) or the applicant in relation to the insurance of the Building. It was common ground that on 9 August 1993 the applicant was overseas either in Kazakhstan or Pakistan. There was no evidence that, between 9 August 1993 and the occurrence of the fire two days later, Mrs Cusmano had any telephone contact with the applicant or in any other manner relayed the substance of her discussion with Mrs Pinner on 9 August 1993. Even if the evidence supported what was pleaded as the substance of that conversation, there could have been no reliance by the applicant upon it.
DID MR PINNER (AND, THROUGH HIS CONDUCT, MLC) ENGAGE IN
MISLEADING OR DECEPTIVE CONDUCT?
In paragraph 10 of the statement of claim the applicant pleads that the conduct of Mr Pinner and MLC was misleading and deceptive in that it induced a belief and an expectation by the applicant that:
.the policy of insurance over the Building against fire and other risks between Mrs Squire and MLC could and would be transferred or assigned to him;
.there were no obstacles or impediments to the transfer or assignment of the policy to the applicant and this would occur as a matter of routine;
.the transfer or assignment of the policy was being arranged by MLC and that appropriate insurance documents would soon be issued to the applicant;
.the applicant at all times had the benefit of cover for fire and other risks which that policy provided; and
.there was no need to arrange further or other insurance against fire or other risks to the Building while the transfer or assignment of the policy was being processed.
It is important to appreciate precisely how the alleged misleading or deceptive conduct is and has previously been pleaded in the statement of claim. The conduct is pleaded as a combination of the express representations pleaded in paragraph 7 of the statement of claim coupled with the silence pleaded in paragraph 8. That portion of Mr Pinner’s conduct being the silence as pleaded in paragraph 8 and his failure to advise of the existence of any difficulty or objection to the transfer or assignment of the policy is not pleaded as a “stand alone” plea of misleading or deceptive conduct. It is expressly linked to the representations alleged in paragraph 7 by the following terms of paragraph 8:
“... in the context and in the light of the representations referred to in paragraph 7 above, this silence by the first respondent and his failure to advise of the existence of any difficulty or objection to the transfer or assignment of the policy constituted representations that the transfer or assignment would be effected and was proceeding through routine channels.”
When the applicant abandoned the express representations formerly pleaded in paragraph 7(b) and (c) to which I have referred above, he made a radical change in the essential basis of his case. In terms of express representations, only paragraph 7(a) and (d) remained. Paragraph 7(d) particularised the telephone conversation on 29 September 1993 (18 days after the fire) which I have dealt with above. There was no reliance by the applicant, prior to the fire, on any such representation and in any event the applicant’s evidence differed substantially from the particular pleaded. That leaves the key paragraph in relation to express representations as being paragraph 7(a) i.e. a representation by Mr Pinner to Mr Cusmano (senior) which included a statement that “he was fixing everything up”. For the reasons which I have set out above, I have found that Mr Pinner did not tell Mr Cusmano (senior) that he “was fixing everything up” or say anything to that effect. In my view, on that finding the whole of the applicant’s case of misleading or deceptive conduct on the part of Mr Pinner and MLC, to the extent that it is based upon express representations, falls away. The same applies to the plea of the various alleged enquiries, silence and failure to advise contained in paragraph 8. In summary, all that the applicant did was to leave a message with a lady at Mr and Mrs Pinner’s home asking Mr Pinner to contact him and leaving a telephone number. In terms of reliance, I find that the applicant did not rely on Mr Pinner’s failure to respond to that telephone call. On the applicant’s own evidence that telephone call took place between March and May 1993. In April 1993 he contacted Cousin Frank and asked him to take up the enquiries with Mr Pinner. I have already given my reasons above for rejecting the alleged enquiries pleaded in paragraphs 8(b), (c) and (d). If the applicant held the beliefs and expectations pleaded in paragraph 10 of the statement of claim, it was not, in my opinion, any conduct or omission on Mr Pinner’s part that led the applicant into those errors. The applicant knew that he had to establish contact with Mr Pinner to provide him with sufficient detail for the arranging of insurance. He knew that his father had passed on his (the applicant’s) Perth telephone numbers. He had not heard from Mr Pinner and (on his own evidence) had tried to contact him. He then chose to rely on what he was told by Cousin Frank. What he was told by Cousin Frank was not correct. In any event, weeks and months passed by without any insurance documentation coming to light. It might well have been good business practice for Mr Pinner to follow up the matter with further telephone calls to Mr Cusmano, at least until Cousin Frank’s message. Thereafter I think there was some justification for Mr Pinner to assume that Cousin Frank was looking after the applicant’s insurance affairs, particularly as there was no further contact from Cousin Frank. But that does not establish that Mr Pinner engaged in misleading or deceptive conduct of the type alleged in paragraph 10 of the statement of claim and particularised in paragraphs 7 and 8. I find that he did not do so. It follows that, for the above reasons, the applicant’s claims against the first respondent and the second respondent must be dismissed.
THE CLAIMS AGAINST ASCOT AND MR FRANCESCO SCALI
There is, in my view, insufficient evidence that the applicant dealt with Ascot Realty Pty Ltd. I infer that the applicant sued Ascot Realty Pty Ltd because a search by his solicitors of the Business Names Register showed that company as the registered proprietor of the business name “Ascot Settlements”. There was no evidence that the applicant was aware of that circumstance before he entered into the contract with the firm known as “Ascot Settlements” for the completion of the contract of sale of the Building. I accept Mr Francesco Scali’s evidence that he conducted the business of “Ascot Settlements”. I find that the applicant’s dealings in relation to settlement of the contract of sale were with Mr Francesco Scali.
THE CLAIMS AGAINST MR FRANCESCO SCALI
Background
When the applicant was finalising the Bank loan arrangements in February 1993 with Mr Anthony Scali, the manager of the ANZ Bank’s Innaloo Branch, Mr Anthony Scali asked him whether he had a settlement agent. The applicant replied that he did not have one. Mr Anthony Scali told the applicant that his brother was a settlement agent. There are some differences of detail between the evidence of the applicant, Mr Anthony Scali and Mr Francesco Scali about precisely what then happened. Nothing turns on these findings, but I accept the evidence of the Scali brothers that Mr Anthony Scali rang his brother and gave him the applicant’s name and telephone number, following which Mr Francesco Scali telephoned the applicant and confirmed that he would be happy to act as his settlement agent in relation to the purchase of the Building. I find that on or about 23 February 1993 Mr Francesco Scali, as the person conducting the business of Ascot Settlements, received a copy of the contract of sale from Mrs Squire’s solicitors under cover of their letter dated 22 February 1993. Forthwith upon receipt of that letter, Mr Francesco Scali did the following things:
. drew up a transfer of the land;
. prepared a settlement statement;
.faxed a copy of the transfer and the settlement statement to the Bank’s Osborne Park Branch where the mortgage documents were being prepared;
.gave the applicant the abovementioned settlement statement; and
.by appointment, attended upon the applicant at his place of employment, obtained and witnessed the applicant’s signature on the transfer and obtained the applicant’s written authority for Ascot Settlements to act as the applicant’s settlement agent. A copy of that document is reproduced immediately below.
______________________________________________________________________
ASCOT SETTLEMENTS
822 ALBANY HIGHWAY, EAST VICTORIA PARK, W.A. 6101
TELEPHONE: 470 4917
FACSIMILE: 362 2777______________________________________________________________________
LICENSEE: FRANK SCALI C.D.
AUTHORITY TO ACT AS SETTLEMENT AGENT
PURCHASER : FULL NAME AND ADDRESS
I, FRANK CUSMANO
UNIT 7, 158 HECTOR STREET, OSBORNE PARK
Being the Purchaser of the property situated at 94 UDUC RD
HARVEY
Do hereby appoint Ascot Settlements to act as my Settlement Agent in respect to the above property.
I agree to pay your property settlement fees and disbursements in accordance with Section 43 and 44 of the Settlement Agents Act 1981. In order to effect settlement, I authorise you to accept and disburse monies as directed on my behalf and to attend to the stamping and registration of documents as applicable.
SIGNED (F CUSMANO) DATE 23/2/93
It is common ground that settlement took place on 18 March 1993 and that at no stage did Mr Francesco Scali raise with the applicant the matter of insurance of the Building or advise him to obtain legal advice in respect of insurance of the Building.
The applicant claims that his engagement of Ascot Realty and Mr Francesco Scali required them to “do all things reasonably incidental to the completion of the contract of sale and to transfer [Mrs Squire’s] interest in the [Building] to the applicant.” Although the third and fourth respondents deny that plea, I accept that that was the obligation accepted by Mr Francesco Scali. The applicant then pleads as a term of the engagement of Ascot Realty and, identically, as against both Ascot Realty and Mr Francesco Scali a duty of care particularised as requiring each of them to:
.exercise all reasonable care to ensure that the applicant received a secure title to the premises;
.exercise all reasonable care to ensure that the applicant had adequate insurance cover for the Building against the risk of damage and consequential loss caused by fire, storm and tempest, theft, public liability and other risks;
.advise the applicant of the need to obtain his own insurance cover against the risk of fire and other risks including, in particular, to warn him against the risks and inadequacies of relying upon Mrs Squire’s insurance cover;
.advise him to review the insurable value of the Building and to obtain or increase insurance cover against, amongst other things, the possibility of total destruction of the property; and
.arrange adequate insurance cover against the risk of loss or damage to the Building caused by fire or other risks and against consequential loss in the event of the total destruction of the Building.
It is not strictly necessary for me to decide whether Mr Francesco Scali was under a duty in terms of that first described above i.e. to exercise all reasonable care to ensure that the applicant received a secure title to the land and premises being purchased, but I accept, for present purposes, that he was under such a duty. The precise content of that duty in the case of a settlement agent does not need to be explored in this matter. There is no plea that Mr Francesco Scali breached that duty in any way. I accept that there was a relationship of sufficient proximity between the applicant and Mr Francesco Scali as to give rise to a duty on the latter’s part to take reasonable care in carrying out the transaction for which he was engaged. In my opinion, a term to the same effect as that duty would be implied into the contract entered into between those two persons. It is necessary to decide whether the duty extended to take the steps described above in relation to insurance cover for the Building.
It is common ground that until settlement the Building was at the risk of Mrs Squire - see condition 10 of the 1991 Joint Form of General Conditions for the Sale of Land incorporated by reference into the contract of sale. That condition relevantly provides as follows:
“Notwithstanding any rule of law or equity to the contrary the property shall be at the risk of the Vendor until the whole of the purchase price is paid or the purchaser is entitled to or is given possession of the property whichever is the earliest and thereupon the risk shall pass to the Purchaser.”
Mr Heenan submitted that, by the operation of s 50 of the Insurance Contracts Act 1984 (Cth), the applicant was temporarily (from the date of the contract of sale until settlement on 18 March 1993) a party to the insurance policy issued by MLC to Mrs Squire. It does not appear to be a material factor in this case but, with all due respect, I do not accept that submission because one of the conditions for the application of that section is that the risk in respect of loss or damage to the relevant building has passed to the purchaser - see s 50(1)(c). Under the terms of the contract of sale it is quite clear that that risk did not pass to the applicant until settlement when the whole of the purchase price was paid. It was common ground that the applicant was not entitled to or given possession of the Building prior to settlement. I now turn to the question of whether Mr Francesco Scali’s duty of care included the duties pleaded by the applicant.
It seems to me that the question is whether a settlement agent in Western Australia acting on behalf of the applicant with reasonable skill and competence would have ensured that the applicant had adequate insurance cover, advised him of the need to obtain his own insurance cover, advised him to review the insurable value of the Building and otherwise advised him in respect of the matters complained of and summarised above?
The applicant did not call any expert evidence but Mr Francesco Scali did call expert evidence. I will turn to that evidence in a moment.
The applicant relied first on a trio of cases. They were Tiffin Holdings Ltd v Millican (1965) 49 DLR 2d 216; Fitzpatrick & Anor v Parker & Anor, Butterworths Unreported Judgment No. BC9604831 and Hawkins v Clayton (1988) 164 CLR 539 at 579 and 584.I must say that I did not find these cases particularly helpful in resolving the content of the duty of care of a settlement agent in Western Australia in 1993. In Tiffin a judge of the Alberta Supreme Court held that a solicitor was not negligent in failing to anticipate criminal acts by a chattel mortgagor. Fitzpatrick involved a finding by a District Court judge in New South Wales that a solicitor was in breach of his duty of care as a solicitor to advise his client of his insurance situation. The client had purchased a building in Newcastle which was damaged by earthquake some six days after the conclusion of the purchase. The proceedings in the Court of Appeal did not concern the issue of negligence but only the issue of causation. In Hawkins v Clayton a majority of the High Court of Australia held that solicitors who prepared and retained custody of a will were under a duty to take reasonable steps to find the executor. I appreciate that Mr Heenan cited Hawkins v Clayton for the general principles giving rise to a duty of care to take positive steps.
Then the applicant relied on a trio of South Australian cases for the proposition that the duties of a settlement agent to his purchaser client resemble the duties owed by a solicitor acting for a purchaser in similar circumstances and extend to all matters necessary and incidental to securing the transfer of a good title and protecting the purchaser’s interests in and in respect of the property acquired. I have quoted the applicant’s submission verbatim. It is the words which I have put in italics which I consider to be critical and at issue in the present matter. The first such case was Jennings v Zihali-Kiss [1972] 2 SASR 493. In that case Bray CJ found, on the evidence, that a licensed land agent had expressly undertaken to perform the obligations of a solicitor to the plaintiff. On the facts his Honour held that an ordinary reasonable and prudent solicitor would not have made the enquiries which the licensed land agent had failed to make and which formed the subject of complaint. I do not think that case is of assistance in this matter. The next case was Georgieff v Athans (1981) 26 SASR 412. That case also was a very different one to the present matter. In Georgieff a land agent acting for a vendor, who was a Bulgarian migrant with a limited command of English, introduced purchasers who were prepared to buy a property on what were described by the trial judge as special conditions of a complex uncertain and ambiguous nature inuring for the benefit of the purchasers. The land agent incorporated those conditions in a contract note which were typed up in the land agent’s office. The Full Court of the Supreme Court of South Australia upheld the trial judge’s finding that it was the duty of the land agent in those circumstances to warn his principal of the risk attaching to the contract and not to leave the obscurity of the conditions unresolved and furthermore to advise the principal to seek independent legal advice so that his interests might be properly looked after. Once again, I do not find that case of assistance in the resolution of the issue in this matter. Then the applicant relied upon Luciano v D G Pty Ltd (1981) 25 SASR 568. That case turned on the extent of a duty of a land agent to advise his principal about the value of land “traded in” as part of the purchase price for land being sold by his client. Although the facts of that matter were very different to the present matter, I found the following passage at 581 of some assistance [given that under the Settlement Agents Act 1981 (W.A.) there have been made and gazetted rules which are cited as the Settlement Agents’ Code of Conduct 1982].
“There are no provisions either in the Land and Business Agents Act or any regulations made thereunder creating any civil liability for any such breach or failure. But it seems to me that a civil court would be justified in treating the Code of Conduct [a code set out in the appendix to the regulations made under that Act] as providing prima facie evidence of the conduct and duties which, in normal circumstances, are expected of a land agent by his fellow practitioners.”
Next the applicant relied upon Fox v Everingham (1983) 76 FLR 170 (a decision of the Full Court of this Court on appeal from a judgment of the Supreme Court of the Northern Territory) for the proposition that a solicitor for a purchaser under a contract of sale would be expected to explain the effect of the contract of sale to the client and to point out the need for insurance if the purchaser entered into possession or completed the sale. In Fox’s case it was common ground on the pleading (see 172) that Mr and Mrs Fox had retained the respondents to advise and act on their behalf in the purchase of a property from a builder who contracted to build a house on that property for them to certain specifications. The Full Court, overruling the Supreme Court, held that in those circumstances the respondents’ retainer was to act generally in Mr and Mrs Fox’s interests in and about their entering into the contract and their taking of title to the property. At 174-179 the Full Court discussed in detail the nature of the duties which the respondents should have carried out at the time when the contract was entered into. At 179 the Court identified the particular breach as being failure to advise Mr and Mrs Fox of their salient rights and obligations under the contract at the time it was signed. The nature of the transaction in Fox’s case is substantially different (including as it did a building contract) from the present circumstances. Furthermore, the question in issue was the extent of the duty of care owed by solicitors in the circumstances of the retainer to which I have referred above. The same can be said of Macindoe v Parbery (1994) 6 BPR 13,483 which involved the retainer of solicitors to draw a contract for the purchase of a boat and sailboard hire business (including the annual licence granted by the local council for that business) and to complete that contract. The applicant also relied upon the decision of Bray CJ in Neagle v Power [1967] SASR 373 which I found to be more helpful. In that case Chamberlain J (at 382-383) observed as follows:
“The first question which arises is what obligation is undertaken by a licensed land broker who acts in a Real Property Act transaction. Under s 271 of the Real Property Act 1886-1963 “The Registrar-General may, with the sanction of the Governor, license fit and proper persons to be land brokers for transacting business under the provisions of this Act, and may, with the like sanction, prescribe the charges recoverable by solicitors and brokers for such business ...”.
A licensed land broker is therefore held out as one fit and proper not only to prepare Real Property Act documents, but to transact business under the provisions of the Act, and for this purpose his fees, and in my opinion his responsibilities, are identified with those of a solicitor. A licensed land broker therefore, who undertakes to act for one or both of the parties to a dealing with land under the Real Property Act 1886-1963, undertakes that he possesses the requisite knowledge, and will exercise the necessary degree of care and skill, to protect the interest or interests of those for whom he acts. So far as a purchaser is concerned, this will involve at least taking steps to see that in exchange for his money he obtains a registrable instrument ensuring a title to whatever he has contracted to buy.”
Bray CJ, while generally agreeing with Chamberlain J on this point said (at 376-377):
“I would not be prepared to assent to the proposition that his duty of care is for all purposes connected with the Real Property Act 1886-1963 identical with that of a solicitor, but I think that at least for the purpose of the transaction of routine business it must be so. It may be, as Mr Boylan contends, that licensed land brokers ought not to be expected to know the niceties of the law. But we are not concerned to fix the appellant with knowledge of the niceties of the law, but whether a licensed land broker can reasonably be expected to know that, if a purchaser pays out the full value of land subject to mortgage without any proof that the mortgage has been discharged, he is in great danger of losing his money.”
Mitchell J expressed the view that it was unnecessary to decide whether in all transactions under the Real Property Act 1886-1963 the standard of care required of a licensed land broker was equal to the standard of care required of a solicitor (see 385).
In my opinion, a solicitor acting for the applicant would have been negligent had he or she not advised him of the need to arrange insurance of the Building from the time of settlement or completion of the contract of sale or (if possession were taken earlier) from the time of possession. I am quite confident that that would be the situation if a solicitor had been so retained before the contract of sale were executed. A prudent solicitor acting reasonably would, in those circumstances, have taken the client through the relevant terms of the contract and explained any pitfalls. That would, of course, have included the matter of arranging insurance at the appropriate time. I am also sufficiently confident that even if a solicitor were retained after the execution of a contract of sale and were retained only to attend to completion and settlement of that contract of sale, he or she would be under an identical duty unless the retainer included a clear term excluding any such duty. I say this because, in my view, the solicitor’s function would not be confined to the relatively routine services of preparation of a transfer, title searches and rates and taxes enquiries, adjustment of rates and taxes, attendance at settlement and registration of the transfer. An essential part of the retainer of a solicitor is that, where reasonably necessary, a solicitor will give legal advice in relation to such a transaction. That legal advice would include the identification of the time at which the client becomes at risk and the steps which should be taken for protection against that risk.
The relationship between a purchaser of land and a settlement agent retained to effect that purchase is, in my view, materially different in that essential factor of giving legal advice. That is not to exclude the possibility that occasions might arise when a settlement agent, acting reasonably, might be required to suggest that the purchaser retain a lawyer to deal with a particular situation which crops up during the course of the transaction. For example, a title search might disclose an easement, the terms of which might require expert assessment and explanation. The same would apply if, by way of further examples, a vendor died or became the subject of a sequestration or winding up order after execution of the contract of sale but before settlement.
A helpful descriptive history of the emergence of settlement agents in Western Australia can be found in Sande v Registrar, Supreme Court of Queensland (1996) 134 ALR 560 at 573-574:
“In Western Australia, the position is somewhat different. Before 1970, settlement agents emerged in that State. The development was probably assisted by a shortage of solicitors in Western Australia during the period from 1960 to 1970. They primarily prepared the instrument of transfer and the settlement statement concerning the adjustment of rates and taxes etc. Other documents relating to a conveyance of real estate were prepared by a solicitor on the instructions of a settlement agent. The settlement agent also made the necessary title searches, arranged for the documents to be stamped, and attended settlement when the purchase money was paid and received. There were no formal qualifications for settlement agents in Western Australia. In 1976 the Settlement Agents Control Bill was introduced into the Western Australia Parliament in an attempt to regulate the activities of settlement agents; but the Bill was not proceeded with: see the Dawson Report at 4. In 1981 the Settlement Agents Act 1981 (WA) and the subsequent Settlement Agents Regulations 1982 came into operation, which in effect recognised the activities of settlement agents and controlled them by statute. Thus, they remain entitled to carry out the work usually involved in a conveyancing transaction, provided they are licensed by a government agency, and provided they comply with legislative requirements concerning codes of conduct, discipline, and other matters. There are hundreds of licensed settlement agents in Western Australia; and the majority of conveyancing transactions relating to domestic real estate is undertaken by them, rather than by qualified lawyers.”
It was common ground as between the applicant and Mr Francesco Scali that any duties of care owed by the latter whether in contract or in tort were identical. In that context I respectfully agree with and adopt what Lee J said about the duties of a settlement agent in The Green Team (WA) Pty Ltd v Brulee Pty Ltd (1995) Aust Torts Reports 81-362 at 62,701:
“The contract between the applicant and L.J.W. Settlements required the latter to arrange settlement of the transaction and to attend on that settlement on the applicant’s behalf to complete the transfer of the property to the applicant in the terms of the contract of sale. It was not part of the contract that L.J.W. Settlements advise the applicant as to the applicant’s rights under the contract. The scope of the contractual obligations of L.J.W. Settlements was considerably narrower than would have applied under a solicitor/retainer if a solicitor had been instructed to perform the same task.”
I now turn to consider the relevant provisions of the Settlement Agents Act and the Settlement Agents’ Code of Conduct. Section 46 of that Act provides that a settlement agent who is duly licensed and certified may arrange or effect a settlement of any real estate transaction that is in respect of land under the Transfer of Land Act 1893 or the Land Act 1933. That entitlement does not extend if the land is not a subdivided lot, is leasehold (other than land under the Land Act 1933), comprises in whole or in part of a business other than a business which is wholly that of farming, or comprises any mining tenement or mining licence (see s 46(2). Section 46(4) provides as follows:
(4) In arranging or effecting a settlement referred to in subsection (1) a licensee may perform the functions set forth in clause 1(1) of Schedule 2 to this Act but in performing any or all of those functions a licensee shall not give or attempt to give advice on a matter of law.”
Clause 1 of Schedule 2 to that Act lists some ten categories of functions which a licensee “may perform”. These range from searching land titles, preparing settlement statements and lodging documents, to reporting on the progress of the settlement to the party who appointed the settlement agent. Nowhere in that list is there any mention whatsoever of insurance. I accept that the list may not be exhaustive, and even if it were, that would not of itself exclude any duty of care in relation to insurance of the type pleaded by the applicant. However, it is a matter upon which I rely to some extent in coming to the conclusion that in 1993 it was not part of the settlement agent’s duty of care to take the action which the applicant claims should have been taken. Clause 1(1)(i) of Schedule 2 provides that a licensee may draw, prepare and arrange the execution of certain documents set forth in subclause (2), subject to any conditions imposed by the code of conduct. Section 82 of the Act also refers to a code of conduct by enabling the Board (the Settlement Agents Supervisory Board), with the approval of the Minister, to make rules prescribing a code of conduct for settlement agents. The applicant places some reliance upon rule 4 of the Settlement Agents’ Code of Conduct which provides, among other things
“... that a licensee shall be aware that his obligation to his client is one of the utmost good faith which requires him not to put his duty to his client in conflict or in likelihood of conflict with his own interests or that of any other person.”
I do not think that that rule advances the contentions of the extent of the content of the duty of care owed by Mr Francesco Scali in the present matter. There was no suggestion that Mr Francesco Scali had acted otherwise than in good faith. Reliance was also placed on rule 11 which provides that:
“11. Whenever it is necessary or prudent to do so, a licensee shall recommend to his client that the client seek the advice of a solicitor in respect of the transaction or any aspect thereof.”
Once again, I do not think that this rule, conditioned as it is by the words “necessary or prudent”, assists in deciding whether the content of the duty of reasonable care owed by Mr Francesco Scali included those relating to insurance which the applicant has particularised and which I have set out above.
Mr Francesco Scali called, as an expert witness, Mr Richard John Wild. Mr Wild was a licensed land broker in South Australia from 1969 to 1973. In 1973 he moved to Western Australia where he was employed by a finance company to prepare mortgages and attend to settlements on behalf of his employer. He has managed two settlement agencies since 1979 and has held a settlement agent’s licence since they were first issued in Western Australia in 1982. He is the immediate past National President of the Australian Institute of Conveyancers, was a member of the Settlement Agents’ Supervisory Board from 1995 to 1997. He is a part-time senior lecturer at the Central Metropolitan College of TAFE in Perth where he teaches settlement procedure subjects to students who wish to qualify as settlement agents. Mr Wild’s evidence (and I accept it) was that it is not the practice amongst settlement agents in Western Australia to take steps to ensure that their purchaser/client has insurance cover for property purchased for the period between the signing of a contract and settlement or for the period after settlement. Mr Wild expressed the opinion that it was not the role of a settlement agent to do that. He said that settlement agents do not get involved in insurance, and did not have a practice of making sure that there was a proper valuation, for insurance purposes, of the property being bought. Mr Wild further said that there was no practice among settlement agents in Western Australia to arrange insurance for their purchaser/clients where their clients’ insurance may not be adequate and that it could not be reasonably expected of a settlement agent in Western Australia to arrange insurance in those circumstances. It was not his practice to make enquiries of purchasers concerning their insurance needs or desires. In Fox v Everingham, the Full Court reviewed some of the case law on the question whether it was necessary for evidence to be called of proper practice on the part of solicitors and whether the Court could take a view of the relevant standard independently of any such evidence. The Full Court held that a Court may form a view of the relevant standard independently of any such evidence (see 178). In supplementary written submissions the applicant contended that following conventional practice does not exclude a finding of negligence. Authority at the highest level was cited for that proposition. Of course I accept it. Nevertheless, I find Mr Wild’s evidence of assistance in drawing the distinction which I have made above between the content of the duty of care of a solicitor on the one hand and that of a settlement agent on the other. In short, I do not consider that that content extended to the matters relating to insurance of which the applicant makes complaint i.e. I do not consider that Mr Francesco Scali was negligent. In those circumstances it is not necessary to consider the further issue of causation. For the foregoing reasons, the applicant’s claim against the third respondent and the fourth respondent will be dismissed.
Conclusion
For the above reasons there will be an order that the applicant’s claims against all of the respondents be dismissed. I will hear counsel on the matter of costs.
I certify that this and the preceding thirty-two (32) pages are a true copy of the Reasons for Judgment of Justice Carr
Associate:
Dated: 5 August 1998
Counsel for the Applicant: Mr E M Heenan QC with Ms K Eagle Solicitors for the Applicant: Messrs Hely Edgar Counsel for the First Respondent: Mr K J Martin QC with Ms K M Halliley Solicitors for the First Respondent: Messrs Minter Ellison Northmore Hale Counsel for the Second Respondent: Mr C J Pullin QC with Mr P E Jarman Solicitors for the Second Respondent: Messrs Jackson McDonald Counsel for the Third Respondent: Dr J T Schoombee with Mr A J Davidson Solicitors for the Third Respondent: Messrs Barker Gosling Date of Hearing: 17, 18, 19, 22 & 23 June 1998 Date of Judgment: 5 August 1998
2
4
0