Fox v Everingham

[1983] FCA 277

Re: GEORGE FREDERICK FOX
And: PAUL ANTHONY EDWARD EVERINGHAM and PETER GEORGE HOWARD (1983) 76 FLR 170
No. NT G 28 of 1982
Solicitors - Practice - Interest

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NORTHERN TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Woodward(1), Muirhead(1) and Sheppard(1) JJ.

CATCHWORDS

Solicitors - breach of contract and negligence - solicitors acting for both parties on contract for sale of land upon which vendor would erect house - purchasers enter into possession of substantially completed house before completion of contract - house then destroyed by cyclone - house not insured either by vendor or purchasers - obligations to advise purchasers on salient points of contract, including need to insure - consideration of that obligation in light of particular provisions of contract - quantification of purchasers' loss.

Interest - claim for interest made in writ and statement of claim - legislation applicable in Northern Territory prior to Northern Territory Supreme Court Act 1979 - interest not recoverable - Supreme Court Act 1979, s.84; Northern Territory Supreme Court Act 1961, s.35; Supreme Court Act 1935 (S.A.), s.30C; Civil Procedure Act 1833 (3 & 4 Will.IV. c.42) s.28.

Practice - Northern Territory - Claim for interest - No provision in respect of claim - Procedural matter - Application of procedure of Supreme Court of South Australia - Procedure at commencement of Act only - Imperial statute applicable - No right to interest - Northern Territory Supreme Court Act 1961 (repealed), s. 35 - Supreme Court Act 1935 (S.A.) s. 30C - Civil Procedure Act 1833 (Imp.), s. 28.

Interest - From arising of cause of action to judgment - No statutory provision in Northern Territory - Practice and procedure of Supreme Court of South Australia applicable - Relevant procedure governed by Imperial statute, Civil Procedure Act 1833 - No right to interest - Northen Territory Supreme Court Act 1961 (repealed), s. 35 - Supreme Court Act 1935 (S.A.), s. 30C - Civil Procedure Act 1833 (Imp.), s. 28.

Legal Practitioners - Solicitor and client - Solicitor's retainer - Acting for more than one party - Vendor and purchaser.

Legal Practitioners - Solicitor and client - Duty and client - Negligence acting for both purchaser and vendor - Duty to protect purchaser under terms of contract - Duty to advise purchaser of rights and obligations under contract - Purchaser entering into possession of incomplete property - Failure to insure - Property destroyed by cyclone.

HEADNOTE

Held: (1) Until the enactment of s. 84 of the Supreme Court Act 1979 (N.T.) there was no local statute empowering the award of interest before judgment on any sum and that section did not apply to the proceedings.

(2) The Northern Territory Supreme Court Act 1961 (now repealed), s. 35, provided that where there was no local provision in relation to a matter of practice and procedure the matter should be governed as nearly as might be by the relevant practice and procedure of the Supreme Court of South Australia.

(3) The provisions of s. 35 were not ambulatory and operated only to pick up the practice and procedure of the Supreme Court of South Australia as it was in 1961 when the Act was passed and the relevant practice and procedure at that time was governed by s. 28 of the Civil Procedure Act 1833 (Imp.).

Moller v. Roy (1976) 11 ALR 398; Fazzolari v. Vinnell (1972) 3 SASR 157; Sager v. Morten (1973) 5 SASR 143, applied.

The retainer given in this case obliged the solicitors to act generally in the interests of the clients in their entering into the contract and taking of title to the property. In particular the solicitors should have

(a) considered whether the contract contained adequate provisions to protect the clients against foreseeable contingencies.

(b) gone through the contract with the clients and explained its salient points, and

(c) pointed out any unusual terms which could affect their interests or require particular action on their part.

The solicitors failed to discharge each of these duties and were accordingly liable in damages for negligence.

Observations upon the difficulty of that it is practically impossible for a solicitor doing his duty to each client properly when he acts for both a vendor and purchaser.

Goody v. Baring (1956) 1 WLR 448, approved.

HEARING

Darwin, 1983, September 20; October 14. #DATE 14:10:1983

APPEAL.

Appeal from the decision of O'Leary A.J. of the Supreme Court of the Northern Territory dismissing a cause of action for breach of contract.

P. Sheils, for the appellant.

T. Pauling and P. Griffin, for the respondent.

Cur. adv. vult.

Solicitors for the appellant: Cridland & Bauer.

Solicitors for the respondent: Poveys.

B.A.G.

ORDER

1. That the appeal be allowed.

2. That the judgment entered by the Supreme Court in favour of the respondents be set aside.

3. That in lieu thereof judgment be entered for the appellant.

4. That the action be remitted to the Supreme Court for the assessment of the appellant's damages.

5. That the respondents pay the appellant's costs of the appeal and of the proceedings to date in the Supreme Court. The costs of the further proceedings in the Supreme Court are to be in the discretion of that Court.

6. That there be liberty to any party to apply on seven days' notice.

Orders accordingly.

JUDGE1

This is an appeal from a judgment of the Supreme Court of the Northern Territory (O'Leary J.) in which an action brought by the appellant against the respondents was dismissed. The action was against three defendants, the two respondents, who were at the relevant time solicitors, and a company, Jim Beam Investments Pty. Limited. The company did not defend the proceedings and his Honour entered judgment for the appellant against it in the sum of $10,000. The cause of action against it was for breach of a contract to sell land upon which the company was to build a house.

The cause of action against the respondents was for breach of obligations they were said to owe the appellant as their client. The company was also their client. The agreement above mentioned was entered into between it and the appellant and his wife, Clarice Fox, on 28 November, 1974. It provided that the company would construct a residence upon certain land and sell the land, upon which would be the completed residence, to the Foxes. Mrs. Fox died before the action was heard. Pursuant to Order 19 Rule 50 of the Rules of the Supreme Court, his Honour proceeded with the case without requiring the appointment of any person to represent her estate.

The Foxes had evinced interest in the land in the early months of 1974. Mr. Fox had discussions with a Mr. Simonetti of Jim Beam Investments Pty. Limited. The Foxes accompanied him to the respondents' office. They were introduced to Mr. Everingham. According to the appellant, Mr. Simonetti told Mr. Everingham that they (the Foxes) were prospective buyers "of the property". The appellant asked Mr. Everingham if he would represent his wife and himself in the purchase of "this house". Mr. Everingham said he would. Certain particulars, including the Foxes' full names and their address were taken. The conversation then ended.

For reasons which need not be mentioned the transaction did not then proceed. But in October 1974 the Foxes decided to go ahead. After seeing his bank the appellant went to the respondents' office. He took with him a cheque for "about $10,000" which he described as "a deposit cheque". He saw a person he described as a secretary. She gave him a contract to look at. He discussed its terms with Mr. Simonetti. As a result of that discussion some changes were made. The contract was then signed by the Foxes. Presumably the common seal of Jim Beam Investments Pty. Limited was placed on it but there is no evidence to this effect. The Foxes' signatures were witnessed by the secretary who had given the contract to the appellant.

The Foxes did not see either of the respondents at the time the contract was signed nor did they see them thereafter. At no time did either of the respondents explain to the Foxes any of the terms of the contract or give them any advice about their rights and obligations thereunder.

The evidence which has been referred to is the only evidence of the retainer of the respondents as the Foxes' solicitors. Neither Mr. Simonetti nor either of the respondents gave evidence. And there was no attempt made to identify or call the person described as a secretary in Mr. Fox's evidence. This absence of evidence is no doubt due to the fact that there is no issue about the retainer. It was pleaded in paragraphs 3 and 6 of the amended statement of claim as follows:

"3. During early 1974 the plaintiffs retained and employed the Solicitor Defendants as their solicitor to advise them and act upon their behalf in the purchase by them from the third defendant of a house which was in the course of being built by the third defendant (and which is hereinafter called 'the property')."

"6. In or about early November 1974 the plaintiffs again retained and employed the solicitor defendants as their solicitor to advise and act on their behalf in the purchase of the property from the third defendant."

In their defence the respondents admitted the truth of those paragraphs.

The contract recited the ownership of the land by Jim Beam Investments Pty. Limited, the selection by the Foxes of plans and specifications of a house, the agreement of the company to erect a house in accordance with the plans and specifications and the agreement of the Foxes to pay to the company the sum of $32,500 for the land "and the completed dwelling house to be erected" by the company.

Clause 1 of the contract provided that the company would sell to the Foxes all the company's right, title and interest in and to the said land and dwelling house for the sum of $32,500. By clause 3 the company was forthwith after the execution of the contract to commence the construction. By clause 4 the sum of $32,500 was to be payable as to the sum of $20,000 on the signing therof to the trust account of the respondents, who were to pay it to the company, as to the further sum of $10,550 on the company giving possession of the property to the Foxes and as to the balance on the date of actual completion of the house. It is to be observed that, notwithstanding the appellant's evidence, the contract contains no reference to a deposit and that the initial payment was to be $20,000, not $10,000 which is the sum which was paid.

By clause 5 completion of the contract was to take place within 13 weeks of notification of completion of erection of the house by thecompany to the Foxes. The clause also obliged the company, upon payment of the purchase price, to deliver to the Foxes a duly executed transfer of the company's right, title and interest in the land.

Clause 6 was in the following terms:

"6. (a) Vacant possession of the land herein agreed to be sold shall be given and taken upon completion of the contract.

(b) Until completion the vendor (or in the event that possession of the property herein agreed to be sold or any part thereof is given to the purchaser prior to completion, then the purchaser) will:

(i) Keep the property herin agreed to be sold in good repair having regard to the condition thereof as at the date hereof;

(ii) Keep the property herein agreed to be sold insured to its full insurable value in the names of the vendor and the purchaser including cover against storm and tempest and breakage of glass and produce the policy to the other party upon demand;

(iii) Observe and comply with the provisions of any Crown Lease in respect of the said land and with any laws for the time being in force governing the use of the said land."

The clause should be considered along with clause 27 which provided:

"The vendor shall at all times during the progress of the work keep the buildings in the course of erection insured in the full value thereof from loss or damage by fire, storm, tempest and earthquake and shall when so requested produce to the purchaser all policies and receipts for premiums."

By clause 25 the company undertook and agreed to complete the erection of the house within 18 weeks of the date of the contract subject to certain contingencies which would entitle the company to an extension of time. Clause 29 provided that until the contract should be completed the company would be and would remain responsible in every respect for all loss, injury and damage to the premises and to the Foxes or the occupiers of any adjoining land or buildings. Clause 32 (which should be considered along with clause 6) provided that if the Foxes entered into possession without the company's consent they should be deemed to have accepted the work as complete and satisfactory. Their entry into possession was to constitute a waiver of claims which they might otherwise have had against the company for faulty workmanship and for other defaults.

It is unnecessary to refer to any other provision of the contract.

Although the evidence is not clear, it would seem that the building must have been commenced well before the date of the contract. That inference must be drawn because the house was in a state of substantial completion a few days before Christmas 1974, three or four weeks after the contract was signed. The work which was outstanding at that time was the installation of kitchen cupboards, the installation of a light in the laundry, the replacement of certain damaged fibro sheets in the eaves, the installation of towel racks and the erection of the fence. It was agreed between the company and the Foxes that the Foxes could move into the uncompleted house which the company would eventually finish. The Foxes moved in accordingly.

On Christmas morning 1974 the house was destroyed by cyclone Tracey. The Foxes found temporary accommodation and eventually went to live in Canberra.

Neither the company nor the Foxes were insured against the loss of the buildings. There is no evidence that the respondents ever advised either the company or the Foxes to take out insurance.

On 1 May, 1975, the respondents wrote to the Foxes as follows:

"re: Purchase from Jim Beam Investments Pty. Ltd.

We refer to previous correspondence in relation to this matter. As you know our client Jim Beam Investments Pty. Ltd. had no insurance over the property the subject of the contract at the time of the cyclone. Pursuant to the contract you were liable to take out insurance cover on the dwelling from the date of possession. Accordingly it would appear that you will be liable to our client in damages for your failure to insure should you not complete the contract.

We would therefore appreciate your urgent advices as to whether or not you intend to complete the contract."

It is to be observed that the letter is written as if the respondents acted only for the company and not for the Foxes. There is no explanation in the evidence of how this came about.

The company then purported to terminate the contract and resold the property. It did not pursue any action against the Foxes but executed a waiver of its rights in order to obtain compensation from the governmental agency charged with providing compensation to victims of the cyclone. The Foxes also made an application for compensation but were told that, because of the waiver, it was considered that they had no claim for uninsured loss or damage to property caused by the cyclone.

The retainer given by the Foxes to the respondents obliged the respondents to act generally in the Foxes' interests in and about their entering into the contract and their taking of title to the property pursuant thereto. At the least that obligation required the respondents, either themselves or by an employee qualified to do so, to go through the contract with the Foxes and explain the salient points of it to them. In this way their principal rights and obligations under it would be explained as would the general course the matter might be expected to take. The respondents were also under an obligations to explain to the Foxes provisions of the contract which were in an unusual form and which might affect their interests as they were known by the respondents to be. In this respect we refer to Sykes v. Midland Bank Executor and Trustee Co. Limited (1971) 1 Q.B. 113 where the Court found a solicitor negligent because he had failed to draw his client's attention to a clause in an underlease which prohibited the use of the premises for other than specified purposes without the consent of the lessor. We refer also to Attard v. Samson (1966) 110 Sol. J. 249.

The respondents were also under an obligation which required them to give attention, before the contract was signed by the Foxes, to the question of whether it, from their point of view, contained adequate provisions to protect them against a variety of contingencies which might reasonably have been foreseen as likely to arise if things did not go as expected. It does not appear whether the contract was drafted in the respondents' office, but it was proffered by them on behalf of the company. The Foxes were entitled to rely on the respondents to see to it that the contract was adequate to protect their interests.

In cases such as the present a solicitor is paid not only for what he in fact does, but also for the responsibility he assumes in trying to protect clients from financial loss if things go wrong. It is easy enough to act for people if things go as they are expected to. But it is because the unexpected will sometimes happen that solicitors are rightly paid the fees which they command. The corollary of this proposition is that if they do not measure up to the standard which is required of them, they are liable for breach of the obligation which they owe to clients. The standard required of them is not an absolute one. In Simmons v. Pennington & Son (1955) 1 All E.R. 240, Hodson L.J. (as he was) approved what had been said by Harman J. (as he was) at first instance. Hodson L.J. said (p.245):

"It is said that Harman J. misdirected himself on the matter, but I cannot accept that. What he said was: 'I do not think I need deal at any great length with the question of a solicitor's liability for negligence. It is the same as anybody else's liability. Having regard to the degree of skill held out to the public by solicitors, does the conduct of the solicitor fall short of the standard which the public has been led to expect of the solicitor?'

I think that that direction was right and consistent with authority."

See also Nocton v. Ashburton (Lord) (1914) A.C. 932 at p.956.

If ever a contract needed careful attention and explanation, it is this one. There are many aspects of it which could be mentioned; we refer to only three, each of which has a direct or indirect relevance to the present problem. The first is whether the contract was intended to be conditional upon the house being completed in accordance with the plans and specifications. If it were, the Foxes would not become the owners in equity of the land upon the exchange of contracts; cf. Davjoyda Estates Pty. Limited v. National Insurance Co. of New Zealand Limited (1965) 69 S.R.(N.S.W.) 381. It is not necessary to determine this question. It is enough to say that there is something to be said for the view that the contract was conditional only and something to be said for the opposite view. Assume, as was the case, that the house was almost completed and the company for any one of a number of reasons was unable to complete it. The land by that time would have become very much more valuable because of the improvement added to it. Were the Foxes intended to be entitled to it, notwithstanding that the contract had not been completed or was the position one under which they were relegated to a personal action against the company? On the one hand they may not have wished to take over an incomplete house; on the other it was intended by the contract that they should by that time have paid at least $20,000 - almost two-thirds of the entire purchase price. The question is a difficult one and ought desirably to have been resolved by an express provision in the contract. That the contract itself is not particularly favourable to the Foxes in this sort of eventuality is revealed by clause 26. It provides that if the company be wound up or enter into an arrangement for the benefit of its creditors or become unable to or refuse or neglect to carry out the work, then the Foxes may terminate the contract. The clause concludes, "upon the service of such notice (of termination), all liability of the vendor to complete this contract shall cease". But what of the entitlement to the land, and what remedies (if any) were the Foxes intended to have, particularly if the reason for non-completion were the financial failure of the company?.

More directly in point are the two clauses earlier quoted concerning insurance. Clause 6(b) of which it will be necessary to say more later, obliges the company (or the Foxes if they have taken possession), inter alia, to keep the property insured "to its full insurable value in the names of the vendor and the purchaser". Thus the clause seems to cast upon the Foxes the obligation to insure if they take possession. But clause 27 obliges the company at all times during the progress of the work to keep the buildings in the course of erection insured in the full value thereof. There is no evidence on the point, but a person not versed in the law might well think that there was no need to insure, if he went into possession, because clause 27 would oblige the vendor to insure. The fact that clause 27 may be overridden by clause 6 or that an insurance policy taken out by the vendor might not benefit the purchaser may be thought to be matters which would not readily occur to a layman.

Finally there is the question of the taking of possession itself. Clause 6, like clause 4, envisages that possession may be taken prior to completion of the contract. But clause 32 makes an important provision if possession is taken without consent. Its operation is such as to bring about a waiver of all claims which the Foxes might otherwise have had in relation particularly to faulty workmanship. A solicitor, retained as were the respondents, had a prime obligation to emphasise to the Foxes the dangers that might arise if they went into possession both from the point of view of their obligation to insure and from the point of view of their possible waiver of claims against the company. The Foxes should have been told when they signed the contract that they would be most unwise to enter into possession, even with the company's consent, without first consulting their solicitor so that they could be protected properly against any adverse consequences of their doing so.

It is plain enough that the respondents failed in discharging these obligations. In the absence of evidence the inference is open, and ought to be drawn, that no thought was given to the question of whether the contract properly protected the Foxes. Fairly plainly it did not. More to the point, having regard to the issues raised by the pleadings in this case, no person in the respondents' office took the Foxes through the contract for the purpose of explaining it to them and drawing their attention to problems that might arise in particular circumstances.

It is convenient to deal at this point with one of the principal reasons why the learned primary judge found against the appellant. It was his view that the Foxes, although they entered into possession of the premises a few days before Christmas 1974, did not take possession in terms of clause 6(b) of the contract. His Honour said:

"'Possession of the property' in clause 6(b) must, I think, mean 'vacant possession', for 'possession' in a contract prima facie means that: Smith v. Chadwick (1882) 20 Ch.D. 27, 58. But, in any event, 'possession' as here used clearly refers back to 'vacant possession' in clause 6(a). Can it be said then that the acts of the plaintiffs in moving some of their belongings into the house and then moving in themselves (at the suggestion of the vendor) amounted, in law, to vacant 'possession of the property . . . agreed to be sold or any part thereof (being) given' to them. As I have said, I do not think so. The 'property . . . agreed to be sold' was the land and the completed dwelling house to be erected on it. The purchasers had the right under the contract to be given vacant possession of that property, and that, I think, comprised 'the right to actual unimpeded physical enjoyment' of it: cf Cumberland Consolidated Holdings Ltd. v. Ireland (1946) K.B. 264 at 271. At the time the purchasers moved into the dwelling it was not completed, and indeed work continued on it up to the time that it was destroyed. I do not think it was in the contemplation of either the vendor or the purchasers at the time that what was being given was 'vacant possession'. What the vendor had to give at that time was something less than that, and indeed the vendor continued to work on the dwelling so that in due course it would be able to give vacant possession. The most that the purchasers can be said to have been given was perhaps some kind of permissive occupancy."

His Honour had earlier concluded that the house, during its construction, was at the company's risk. Since, in his view, the Foxes were not in possession within the meaning of clause 6, they were not under any obligation to insure. There was therefore no obligation upon the respondents which required them to advise the Foxes that they should insure because their taking of possession had placed the risk on their shoulders instead of those of the company.

In passing it should be said that there is no evidence that the respondents were ever told by the company or the Foxes that the Foxes were about to go into possession or had gone into possession. The breach of obligation upon which the appellant must rely, if he is to succeed, must be shown to have occurred, therefore, at or about the time that the contract was entered into.

In our opinion the conclusion of his Honour that the Foxes did not go into possession within the meaning of clause 6 of the contract is not correct. As the passage cited from his judgment shows, it was his view that possession in clause 6(b) was the same as 'vacant possession' in clause 6(a). We do not agree with that view. It is clear that vacant possession was not to be given until completion of the contract. So what was being dealt with in clause 6(b) was the situation prior to completion of the contract. The words, "Until completion" plainly refer to the completion of the contract. Thus where, in parenthesis, the opening words of the clause refer to the giving of "possession of the property . . . . or any part thereof" they are speaking of a possession short of the vacant possession referred to in clause 6(a). In our opinion clause 6(b) contemplated that the Foxes might, prior to the completion of the contract, enter into possession of the whole or part of the property. In that event the Foxes were to assume responsibility for repair (although what the significance of the phrase "as at the date hereof" is we do not know); they were then obliged to keep the property insured and they were to observe and comply with the provisions of any applicable Crown Lease and with any laws governing the use of the land.

The Foxes did go into possession when the building was almost complete. Their possession was not exclusive because the company continued to be entitled to come on to the property for the purpose of completing the building and the fence. But the possession which the Foxes had was possession for the purposes of clause 6(b). It followed that when they entered into possession in the way that they did they became obliged to insure the property. The insurance was to be for the full insurable value of the property and in the names of the company and themselves.

That they failed in this obligation is common ground. It was indeed in respect of this matter that the respondents themselves in their letter of 1 May, 1975, earlier quoted, alleged on behalf of the company that the Foxes were in breach of the contract. The letter said that the Foxes would be liable to the company in damages for their failure to insure should they not complete the contract. It should be said at this point that it lies ill in the mouths of the respondents, having on behalf of the company made that allegation, now to argue, as they did before the learned primary judge and before us, that the Foxes were under no obligation to insure because they were not in possession. It may be, as counsel for the respondents suggested in arguement, that at the time the letter of 1 May, 1975, was written, the respondents were no longer the Foxes' solicitors. It may have been that the full implications of what was being said did not manifest themselves to the respondents in the turmoil which must have existed in the aftermath of the cyclone. But this is speculation. It is something upon which one would have preferred to have some evidence.

However, counsel for the respondents stressed that the letter and its implications were not matters in issue in the case. That is something with which we tend to agree. But it should be said that this case again highlights how difficult it is for the one solicitor to represent adequately both parties to a conveyancing transaction. Warnings about the problems which arise continue to be sounded. In Goody v. Baring (1956) 2 All E.R.11, Danckwerts J. (as he was) said (p.12) that it seemed to him practically impossible for a solicitor to do his duty to each client properly when he tries to act for both a vendor and a purchaser. He referred to what Scrutton L.J. had said in Moody v. Cox & Hatt (1917) 2 Ch.71 at p.91. Later Danckwerts J., after referring to what Hodson L.J. had said in Simmons v. Pennington & Son (supra), said that it was plain that the standard of skill and care required of a solicitor who acts for both parties on a sale and purchase is at least as great as that which would be required of a solicitor who acts for a purchaser (or, we would add, a vendor) alone.

In support of his case the appellant called two Darwin solicitors, Messrs. Parish and O'Neill, to give evidence of proper practice in the circumstances of this case. There was some discussion during the argument as to whether this evidence was necessary or whether the Court could act without any such evidence or could take a view of the relevant standard independently of any such evidence. Plainly the Court may do so. It is one field where it is not essential that expert evidence be called. In Goody v. Baring (supra) no expert evidence was called for the plaintiff. On behalf of the defendant three solicitors were called. They included the defendant himself. Danckwerts J. did not accept the evidence of any and found negligence established. Counsel there contended that the Court was bound to accept the evidence of the solicitors on the question of the proper practice. He submitted that the Court was not at liberty to draw on its own conveyancing experience. That submission was rejected.

In Neagle v. Power (1967) S.A.S.R.373 Bray C.J. referred to a complaint by counsel that there was no evidence of the practice of land brokers or of the standard of care normally exercised in that occupation. His Honour continued (p.376):

"Such evidence has not been thought necessary in the case of actions against solicitors. The Court presumably knows for itself what the ordinary reasonably prudent and careful solicitor ought to know and to do."

Bray C.J. expressed similar views in Jennings v. Zilahi-Kiss (1972) 2 S.A.S.R. 493 at p.513.

In our opinion the uncontested evidence plainly establishes a breach by the respondents of their obligations to the Foxes. The breach occurred when they failed to advise the Foxes of their salient rights and obligations under the contract at the time it was signed. They were probably also in breach of their obligations in not seeing to it that the Foxes were better protected than they were under the contract; clause 26 earlier referred to provides an example of this. But the case against the respondents is based on their failure to explain, and advise the Foxes about, the important provisions of the contract into which they did enter. Upon the basis of what we have earlier said it was the clear obligation of the respondents to emphasise to the Foxes the changes in their rights and obligations which would come about if they went into possession before completion of the contract. Relevantly they should have been advised that if they did so they must themselves take out a policy of insurance. The respondents not knowing that the Foxes did go into possession some three weeks or so after the contract was signed, a question arises as to whether any damage is shown to have resulted from the breach. This is a twofold question. The first part of it concerns the question of whether, had the Foxes been properly advised, they would have remembered to insure the property some three weeks later. Of course, if they had had stressed to them the desirability of coming back to the respondents if any question of going into possession had arisen, it would probably have followed that they would have done so. But, in any event, the appellant gave evidence that if he had been told that if he were to go into possession he had to insure, he would have done so. His Honour appears to have accepted the general purport of the appellant's evidence. It follows in our opinion that the breach of obligation which has been established did lead to the failure of the Foxes to insure.

The second part of the question is whether, if the Foxes had insured, the insurance would have been available to indemnify them for their loss of the sum of $10,000 which had been paid as well as their liability to the company. It was concluded by his Honour and submitted to us by counsel for the respondents that, although the Foxes had an insurable interest, they did not have such an interest in the property as to enable them to recover the $10,000 which they had paid. In this regard it should be mentioned that his Honour thought that the appellant's submissions were based on a misunderstanding of the principles of insurance law as applicable to policies for the protection of work in the course of construction. He said that such policies were commonly known as "builder's risk" policies or "course of construction" policies. Under such a policy, so his Honour said, the loss that would have been principally recoverable would have been the vendor's loss, the purchasers' interest being at best a limited one. His Honour added, "The most that the purchasers could have hoped to receive under the policy would have been some surplus over the vendor's loss for which the vendor might have had to account to them, and there is no evidence before me that there would have been any such surplus to which they would have been entitled . . . . "

We would respectfully point out that insurance of the kind contemplated by his Honour was not the insurance contemplated by the contract. The insurance which it contemplated was an insurance by which the property was covered "to its full insurable value in the names of the vendor and the purchaser". Thus the intention was that, in the event of the damage or destruction of the partially completed building, each party would be covered for his interest therein.

As earlier indicated, there may have been a question initially as to what interest in the property the Foxes were intended to have pending the completion of the house. It may have been that they were not intended to have any interest in the property, legal or equitable, until its completion and the period provided for in clause 5 commenced to run. But in our opinion the position became certain upon the Foxes taking possession of the property. The house was then in a substantially completed state. Their entry into possession manifested an intention to accept it pursuant to the contract. The company, by agreeing to their entry into possession, intended that they should. Thus, although the contract may have been conditional up to that point of time, it thereafter became unconditional. Thenceforward, if not before, the Foxes acquired an equitable interest in the property which they were entitled to insure. If they had done so, their loss occasioned by the cyclone (which may well have exceeded $10,000) would have been recoverable under the policy. That this was the common intention of the parties is confirmed, in our opinion, by the terms of clause 6(b) of the contract which operated, in the event that the Foxes took possession thereunder, to transfer the obligation, not only to insure, but also to keep the property in repair.

We make it clear that the entry by the Foxes into possession did not operate to waive any claims they may have had against the company, for example, for faulty workmanship. There would have been no waiver because they entered into possession with the company's consent; see clause 32. But such claims as they may have had would not have permitted them to rescind the contract. Their taking of possession would have relegated them to an action against the company.

What we have said is enough to entitle the appellant to succeed. But there are some other matters which we should mention. The case was put against the respondents in three alternative ways, with one of which we have dealt. Another alternative was that, notwithstanding the provisions of the contract in relation to insurance and the risk being with the company, at least until possession was given, a prudent solicitor would nevertheless have advised the Foxes to insure their interest. That is not a submission with which we need deal, although we mention that one of the practitioners called thought that such a course would have been desirable, as we do ourselves. Nevertheless we do not need to draw a conclusion on whether failure on the part of the respondents to advise it amounted to breach of their obligations to the Foxes.

The third alternative was based upon the failure of the respondents to see to it that the company itself had taken out insurance or at least to advise the Foxes that they should be satisfied themselves that this had been done. We think there is substantial force in this submission but its consequences may not be of importance because of the change which came about when the Foxes entered into possession. It was then the purchasers' obligation to insure. Of this they were ignorant. Their ignorance was due to the respondents' breach of obligation. That, in our opinion, is the kernel of the case.

Then we should mention that we have not said anything of the detail of the evidence of Messrs. Parish and O'Neil concerning proper practice in a case of this kind. It is enough to say that, generally speaking, it is in accordance with our own views of what the respondents' obligations were.

Finally we should say something of the claim made by the appellant for interest. His Honour did not deal finally with this claim but reserved liberty to apply in relation to it. Because his decision was adverse to the appellant there was no point in the appellant pursuing it at that stage. Strictly the matter is not before us because it has not been dealt with by the learned primary judge, but we think it useful to express our views upon it.

Until the enactment of s.84 of the Supreme Court Act 1979 there was no local statute empowering the award of interest before judgment upon any sum. That section has no application to the present proceedings.

Section 35 of the Northern Territory Supreme Court Act 1961 (now repealed) provided that where no provision in relation to a matter of practice and procedure of the Supreme Court was contained in the Act or in any other law in force in the Territory that matter should be governed, as nearly as might be, by the practice and procedure of the Supreme Court of South Australia in similar matters. In Moller v. Roy (1976) 11 A.L.R. 398, Franki J. (sitting as an additional judge of the Supreme Court of the Northern Territory) was asked to use that section to apply the provisions of s.30C of the Supreme Court Act 1935 (S.A.). That section had come into force in South Australia in 1972. His Honour held that he could not apply it to the proceedings before him because the provisions of s.35 of the Northern Territory Supreme Court Act were not ambulatory and operated only to pick up the practice and procedure of the Supreme Court of South Australia as it was in 1961 when the Northern Territory Supreme Court Act was passed.

Prior to the enactment of s.30C of the Supreme Court Act 1935 (S.A.), the Supreme Court of South Australia considered that s.28 of the Imperial Act, 3 & 4 Will.IV, c.42 (the Civil Procedure Act 1833), applied in South Australia; see, for example, Fazzolari v. Vinnell (1972) 3 S.A.S.R.157 at p.163 and Sager v. Morten and Morrison (1973) 5 S.A.S.R.143 at p.163

The award of interest pursuant to a statutory power such as is conferred by the Civil Procedure Act is a matter relating to procedure; see Ruby v. Marsh (1975) 132 C.L.R. 642 per Gibbs J. (as he was) at p.656 and Simonius Vischer v. Holt & Thompson (1979) 2 N.S.W.L.R. 322 per Moffitt P. at pp.336-7. Accordingly the Civil Procedure Act was in force in the Northern Territory at the time the Foxes' action was commenced. But it does not, in our opinion, operate so as to entitle the appellant to claim interest. The provisions of s.28 of the Act are as follows:

"That upon all debts or sums certain, payable at a certain time or otherwise, the jury on the trial of any issue, or on any inquisition of damages, may, if they shall think fit, allow interest to the creditor at a rate not exceeding the current rate of interest from the time when such debts or sums certain were payable, if such debts or sums be payable by virtue of some written instrument at a certain time, or if payable otherwise, then from the time when demand of payment shall have been made in writing, so as such demand shall give notice to the debtor that interest will be claimed from the date of such demand until the term of payment; provided that interest shall be payable in all cases in which it is now payable by law."

It is to be observed that the section has two limbs. The first applies to debts or sums certain payable at a certain time where such debts or sums are payable by virtue of some written instrument at a certain time; see London, Chatham and Dover Railway Co. v. South Eastern Railway Co. (1893) A.C. 429 at p.434 and Maine and New Brunswick Electrical Power Company Limited v. Hart (1929) A.C. 631. The moneys claimed by the appellant in this case do not fall within this limb of the section if for no other reason than that they are not payable at a time certain.

The other limb of the section relates to debts or sums certain payable otherwise than at a certain time. So far as such moneys are concerned interest will only be recoverable from the time when demand of payment shall have been made in writing. It was said that a demand for interest had here been made in the writ, the statement of claim and the amended statement of claim. But it was long ago held that for there to be a demand under the section, it must have been made prior to the commencement of the proceedings; see The Rhymney Railway Company v. The Rhymney Iron Company, Limited (1890) 25 Q.B.D. 146 at p.151 and Genvrain v. Beck (1925) 41 T.L.R. 629.

It follows that the Supreme Court has no power to award the interest which the appellant claims.

For the reasons we have given the appeal will be allowed and the judgment for the respondents entered by the Supreme Court set aside. In lieu thereof judgment should be entered for the appellant. But there remains a question as to the amount of that judgment. The only loss established by the appellant is the sum of $10,000 paid on account of the moneys due under the contract. There was a faint attempt to amend this claim during the hearing before us but it was not proceeded with. The appellant has judgment for $10,000 against the company. It was said by counsel for the appellant that the judgment was valueless, but counsel for the respondents objected to the statement being made because there was no evidence of the truth of it. The statement was withdrawn.

Although the appellant has established his case against the respondents, he is only entitled to recover against them what in fact he has lost as the result of their breaches of obligation. If the judgment against the company is not valueless, then the appellant must give credit to the respondents for any sum which has been recovered or will be plainly recoverably from it. But if the judgment is valueless, or if only part of the moneys due thereunder can be recovered, then the appellant should have judgment against the respondents for the whole sum of $10,000 or such part of it as will not be recovered under his judgment against the company.

We should, perhaps, add that there is no reason why the appellant should not recover judgment both against the company and the respondents. This is not a case where the respondents and the company were sued in the alternative, nor a case where the respondents and the company are jointly liable. The matters we have mentioned go not to the entry of judgment, but to the ascertainment of the appellant's loss as a result of the respondents' breaches of obligation. If the appellant recovers his loss from the company, his damages under the judgment against the respondents will be nominal only.

Since the position is not known to us, it will be necessary for the matter to be remitted to the Supreme Court for the assessment of the appellant's damages. Because of the long history of the matter and the desirability of there not being incurred further costs, we would hope that the parties might reach agreement on what is to be done.

The orders which we make are as follows:

1. That the appeal be allowed.

2. That the judgment entered by the Supreme Court in favour of the respondents be set aside.

3. That in lieu thereof judgment be entered for the appellant.

4. That the action be remitted to the Supreme Court for the assessment of the appellant's damages.

5. That the respondents pay the appellant's costs of the appeal and of the proceedings to date in the Supreme Court. The costs of the further proceedings in the Supreme Court are to be in the discretion of that Court.

We reserve liberty to any party to apply on seven days' notice.