Eric K. Prince and Associates P/L v Williams, H.K.

[1993] FCA 365

365      1993

JUDGMENT No. ........ ........ .. I ........ ,,,,

IN TIlE FEDERAL COURT OF AUSTRALIA

1

NEW SOUTIl WALES DISTRICT REGISTRY	) No NG 860 of 1992
GENERAL DIVISION	)
1

On anneal froln a single judge of the

Federal Court of Australia

BETWEEN:  E R l C K. P R I N C E A N D

ASSOCIATES PTY LIMITED

First Appellant

ERIC I<. PRINCE

Second Appellant

AND:  HOWARD KERR WILLIAMS
PETER JAMES EVANS
JOHN KERR WILLIAMS
ROSS ANTHONY LINDGREN
MICHAEL PAUL McDONALD
TOMAS MOK FU YIM trading as
HARRTS WI-IEELER

First Respondents

B E N E F I C I A L F I N A N C E

CORPORATION LIMITED

EX TEMPORE

Second Respondent

Coram.	Davies, H111 & Beazley JJ.
Date:	17 May 1993
U:	Sydney

REASONS FOR JUDGMENT

Davies J.:	Thls is an appeal from a judgment of a single judge of the court, Wllcox
J.	The issue before his Honour was whether a solicitor, Mr Hawkins, of Harris

Wheeler, had been negligent in falllilg to advise his chent, Beneficial Finance

Corporation Ltd ("Beneficial"), who proposed to lend $300,000 on the se~vrity ot certain land, that the mortgagor had only shortly before purchased the land for

$65,000. The appellants, Erlc K. Prince and Associates Pty Limited and Eric K.

Prince, who were the valuers involved in the transaction, claimed against the solicitors

on a cross-clalm, seeking indemnity or contribution.

HIS Honour indicated that he would be prepared to flnd that, in the ordlnary course of events, a solicitor would be under a duty to a client to draw attention to any aspect of a transaction which called Into question the adequacy of the client's security. His Honour decllned to draw that inference in the arcurnstances of the transaction in

question. HIS Honour said:-

"I feel thal it 1s d~fficult to say that thcrc was neghgence at thal polnl of time, wlthoul

a grealcr understanding of what opyorlunlty he (Mr Hawkms) then had 10 cons~der

the matler The only lhlng that is clcar 15 that everything was done m a rush "

I agree with his Honour's conclusion in thls respect. Not only was there no evidence from a conveyancer or solicltor expert in the field, but there was no evldence as to the whole of the conversation between Mr Speers of Beneficial and Mr Hawkins at the time when Mr Hawkins was given instructions. Mr Speers could not recall the conversation and Mr Hawkins was not called to give evidence. Accordmgly, it is not known whether anything was said in that conversation about the subject of value. What is known is thal Mr Speers was m fact aware that the land had been purchased

by the mortgagor for a sum substantially less than the amount which was proposed to

be lent upon its security. Mr Speers' ille note of 26 July recorded inter a11a:-

"the purchase of Lot 3, Gardlners Road, Rutherford (the subjca land)

for $15 1,800.''

The file note also recorded:-

"Urgen~y rcqulred as vcndor IS BHP and true value 1s dose to 5500,000 wllh other

parties anxlous to buy!'

This evidence was put to Mr Speers m cross-examinat~on. At one polnt he denied

that he understood that the file note recorded that the land was being purchased for

$151,800, but that seems Inconsistent wlth the substance of the iile note.

Mr Speers also gave this ev~dence m cross-examination:-

"Well, you took the trouble to record thal he was buylng t h ~ s	land lor 9150,000. It
was worth $500,000 and there were other partles anxlous to get m under h ~ s	guard.

That was thc effect o l what you said a i t not?	No	What it w saying, 1s Mr Bourke
was most annous."

It is clear that the mortgagor was anxious to have the matter dealt with speedily and

that, notwithstanding that the property had been purchased for less than the $300,000,

which was the sum to be lent, the mortgagor's view was that the true value was close to $500,000. It 1s also clear that Mr Speers obtained hls own valuation trom a registered valuer which valued the property at $400,000.

It is not known whether anyth~ng was said by Mr Speers to Mr Hawkins on the subject of value. He may well have communicated to Mr Hawk~ns that, notwith- standing that the property had been purchased for less than $300,000, he was nevertheless satistied with the value and that Mr Hawkins should attend urgently to the conveyancing aspects of the transact~on.

What is known is that oral lnstructions were gwen on 31 July, on the same day that Mr Hawluns had received from the mortgagor's solicitors a number of relevant documents, including the transfer, which disclosed a consideration of $65,000. Mr

Hawkins immediately prepared and on 1 August sent off relevant documents to the

mortgagor's solicitors. In his letter of that day he stated, inter alia:-

"We acknowledgc recelpt or your letlcr of 30 July, togelhcr w~th ds cnclosurcs and

once same has bccn ~nspecled by thc writer, WC w~ l l	adv~sc	you of any outstanding
requlrcments.

On 2 August, the matter was settled by Beneficial, who dealt directly with the

mortgagor or with the mortgagor's sohcitor.

In my oplnion, it is not established that it was negligent on the part of Mr

Hawkins not to inform Beneficial of the purchase price of the property. This is

particularly so in the circ~imstance that Beneficial had obtained a valuation iiom a

registered valuer, was aware that the purchase pnce was substant~ally less than the

sum to be lent - although it was apparently not aware that the price was $65,000 - and

was nevertheless prepared to rely upon the valuation.

I would not draw the conclusion that, in an urgent transaction such as this, the

solicltor had a duty to the client to do other than to attend to the necessary

conveyancing aspects of the mortgage. This Mr Hawkms did. Even if there had been

a duty on the part of Mr Hawkins to advlse generally m relation to the transaction, it has not m my opinlon been shown that Mr Hawklns had an opportunity fully to

peruse the transfer or to appreciate the significance of the purchase price.

As the learned tr~al Judge said, "everything was done in a rush and it appears

from Mr Hawkins' letter of 1 August that he proposed to look at the documents with

greater care and in more detail when he had an opportunity to do so. It has not been

shown that he had any such opportunity.

For these reasons, I agree with h ~ s Honour's findlng that the claim failed on

the onus of proof. No duty to advise respechng value and no neghgence was

established on the evidence before his Honour. The appeal sl~ould be dismissed.

HILL J:  I agree with the reasons of Dwies J. The trial Judge, W~lcox J., held that

the cross-cla~mant had not discharged the burden of establishmg negligence on the part of those actlng in the matter on behalt of Harris Wheeler. In my view this

finding was correct and should not be disturbed.
BEAZLEY J:	I agree wth the reasons of Davies and Hill JJ.

I cerhfy that this and the 4 preceding pages
are a true copy of the Reasons for Judgment

of Mr Justlce Dav~es, Mr Justice Hill and Justice Beazley.

Date: 23 March 1993