Francis v Whatson

[1993] QCA 388

IN THE COURT OF APPEAL

[1993] QCA 388

SUPREME COURT OF QUEENSLAND

Appeal No. 61 of 1993

Brisbane

[Whatson v. Francis, Barnes]

[Porter v. Francis, Barnes]

BETWEEN

STEPHEN NORMAN RICHARDS

Plaintiff

and

BLAIR FRANCIS

First Respondent/Defendant

and

IAN HAROLD BARNES

Respondent/First Third Party

and

KEITH PORTER

Second Third Party

and

WINSTON WILLIAM WHATSON

Appellant/Third Third Party

Appeal No. 62 of 1993

BETWEEN

STEPHEN NORMAN RICHARDS

Plaintiff

and

BLAIR FRANCIS

First Respondent/Defendant

and

IAN HAROLD BARNES

Respondent/First Third Party

and

KEITH PORTER

Appellant/Second Third Party

and

WINSTON WILLIAM WHATSON

Third Third Party ____________________________________________________________ _____

Mr Justice Pincus Mr Justice Davies Mr Justice Moynihan

____________________________________________________________

_____

Judgment delivered 12/10/93

Joint reasons for judgment of Pincus J.A. and Moynihan S.J.A., Davies J.A. separate - all concurring as to the orders made.

____________________________________________________________

_____

IN APPEAL NO. 61 OF 1993, APPEAL ALLOWED.
ORDER NOS. 4 AND 6 MADE IN THE DISTRICT COURT IN THESE
PROCEEDINGS AND DATED 24 MARCH 1993 SET ASIDE. IN LIEU
THEREOF, ORDER THAT PROCEEDINGS BROUGHT BY FRANCIS AGAINST
WHATSON IN THE DISTRICT COURT BE DISMISSED.
RESPONDENT FRANCIS TO PAY APPELLANT WHATSON'S COSTS OF THE
APPEAL, TO BE TAXED.
RESPONDENT FRANCIS TO PAY APPELLANT WHATSON'S COSTS OF THE

PROCEEDINGS IN THE DISTRICT COURT, TO BE TAXED.

IN APPEAL NO. 62 OF 1993, APPEAL DISMISSED.
APPELLANT PORTER TO PAY RESPONDENT FRANCIS' COSTS OF THE
APPEAL, TO BE TAXED.
____________________________________________________________

_____

CATCHWORDS:	NEGLIGENCE - Duty of care - representations made by yacht broker as to title of stolen boat - boat sold after representations made - whether broker owed duty of care to purchaser - whether duty breached - whether purchaser entitled to indemnity by broker.
LIMITATION - whether action for negligence and indemnity against Whatson
statute-barred - whether cause of action arose on original sale of boat to Francis or on seizure of the boat by police from second purchaser or on judgment being given establishing the defendant's liability to the plaintiff.
Counsel:	Mr K Fleming QC with him Mr K Murphy for the appellant/third third party.
Mr J Douglas QC with him Mr L A Stephens for the first respondent/defendant and the second respondent/first third party.
Mr B Holloway for the appellant/second third party.
Solicitors:	B J Holloway & Co. for the appellant/third third party.
S J Hockey for the first respondent/ defendant and the second respondent/first third party.
B J Holloway & Co. for the appellant/second third party.
Hearing Date:	02/08/93.IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 61 of 1993.

Brisbane

Before	Pincus J.A. Davies J.A. Moynihan J.
BETWEEN

STEPHEN NORMAN RICHARDS

Plaintiff

and

BLAIR FRANCIS

First Respondent/Defendant

and

IAN HAROLD BARNES

Respondent/First Third Party

and

KEITH PORTER

Second Third Party

and

WINSTON WILLIAM WHATSON

Appellant/Third Third Party

Appeal No. 62 of 1993

BETWEEN

STEPHEN NORMAN RICHARDS

Plaintiff

and

BLAIR FRANCIS

First Respondent/Defendant

and

IAN HAROLD BARNES

Respondent/First Third Party

and

KEITH PORTER

Appellant/Second Third Party

and

WINSTON WILLIAM WHATSON

Third Third Party

JOINT REASONS FOR JUDGMENT OF

PINCUS J.A. AND MOYNIHAN S.J.A.

Judgment delivered 12/10/93

These are appeals from a judgment of the District Court in a case concerning two sales of a boat. Appeal No. 61 of 1993 is brought by Mr W W Whatson, and Appeal No. 62 of 1993 is brought by Mr Keith Porter.

Porter and Whatson were at relevant times partners in a yacht broking business. About 18 July 1986, a Mr Barnes sold a boat, a 25 ft Bertram cruiser, to a Mr Francis, for $33,500; Porter acted as a broker in that sale. About 15 November 1986 Francis sold the same boat to a Mr Richards for $36,500. Neither sale passed title to the boat, because at all material times the boat was owned by a Mr George.

The police, acting on George's complaint, seized the boat from Richards, (the second purchaser) in May 1987.

In District Court proceedings, Francis sued Barnes in respect of the first sale; the claim was for contribution or indemnity and alternatively for damages for breach of the implied condition with respect to right to sell provided for in s. 15(1) of the Sale of Goods Act of 1896. Francis' claim succeeded. Richards made a similar claim against Francis and that succeeded as well. Neither of these claims, by Francis and by Richards, is presently in contention and the appeals have to do with two other claims made by Francis - two claims made by him other than that against Barnes. Francis alleged in these two claims that Porter gave him negligent advice or information concerning title to the boat.

Francis sued Porter by serving a third party notice on him claiming to be indemnified against Richards' claim against Francis; that claim was made in June 1989. More than three years later, on 22 December 1992, Francis sued Whatson for similar relief, again by serving a third party notice. Both of these claims by Francis succeeded, but each of Porter and Whatson has appealed. Porter's appeal depends solely on the proposition that the judge was in error in finding that there was a breach of duty on Porter's part involved in the way in which he acted with respect to the first sale, that from Barnes to Francis. Whatson's appeal raises that point and is also based on the contention that the claim against Whatson was statute-barred.

Porter and Whatson were, at the relevant time, partners as we have said and it is not in dispute that if Porter was liable then, subject to the time limitation point, so was Whatson; it was not suggested that the fact that Whatson was not sued jointly with Porter constituted a defence for either of them.

Breach of Duty

It was argued on behalf of Whatson, who was held vicariously liable for Porter's actions, that there was not shown to be any relevant duty of care in Porter. Mr Fleming QC, who led for Whatson, advanced that argument and his contentions were adopted by Mr Holloway who appeared for Porter. Francis' claim set up a negligent representation by Porter that he had checked out the title to the boat and that it was clear. There was evidence that an inquiry of the police would have revealed, without any difficulty, that the boat in question was reported as having been stolen.

The judge found that an inquiry made in July 1986 would have produced advice to that effect.

An attack was made, on behalf of Whatson, on the judge's findings with respect to this question - i.e. whether the situation was such as to give rise to a duty in Porter to take care, in a relevant way. There was no dispute that there were conversations between Porter and Francis about the boat; Porter had no specific recollection of those conversations, and Francis' evidence about them included inconsistencies and was to an extent imprecise, in the judge's view. However, her Honour found that Porter became aware that Francis was concerned about clear title; that Francis made it clear to Porter that he was relying on Porter to check out title; that Porter agreed to do so; and that Porter told Francis that he had done so. In favour of Porter and Whatson, however, it must be said that the judge found that Francis "may not have said what specific checks he would like to have done"; and that checking out title is not undertaken in the normal course of a yacht broker's business.

The contention that these findings and in particular the finding that Francis made it clear to Porter that he was relying on him to check out title cannot stand requires some analysis of the evidence. In chief, Francis said that he asked Porter to "thoroughly check the vessel out", to "make sure everything was okay as far as mechanical condition went" and to "check that the vessel was unencumbered and, you know, clear title". According to Francis, Porter said "they do do that". Before settling, Francis said, he had a conversation with Porter in which he asked him whether everything had been checked and Porter said "everything was all right".

In cross-examination Francis gave some answers which were not, from his point of view, as satisfactory as those given in chief. A passage particularly relied on by the appellants was the following :

"I am asking you, what did you mean by "check it out"? What did you have in your mind?-- Check it out to see it wasn't stolen, nor under hire purchase, nor under a bill of sale or any such other thing.

You have stated that you asked Porter on the 18th had everything been checked out and Porter said everything was all right?-- That's right.

They were the words used?-- I don't remember the exact words used. I just asked had the boat been checked out thoroughly and the answer on the thing was "yes".

That is when you got the statutory declaration?-- Yes.

...

I put it to you that that was all Mr Porter had ever warranted or had ever promised that he would do for you-- I asked him did he check the boat out thoroughly and he said, "Yes." I said, do you check it in the first place and I asked at the end had it been done.

You have told the Court that you were expecting Mr Porter to check out whether the boat was stolen, whether it was under hire purchase or whether there was a bill of sale in respect of the vessel?-- I didn't say it in that way. I said, "Do you thoroughly check the vessel out?" Those are the things I have in mind.

I am asking you, that's what you expected would happen?-- Yes."

In our view it was open to the judge, who had the advantage of seeing and hearing Francis' evidence given, to make the findings she did. It is true that, as the judge's reasons recognise, there were imperfections in Francis' evidence on the point and, at least arguably, inconsistencies between the versions given in chief and cross-examination. But we are far from thinking that the case is one in which the judge's factual conclusions with respect to the relevant conversations between Porter and Francis can be upset; this Court could not in the present case be satisfied -

"that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion." : Watt or Thomas v. Thomas [1947] A.C. 484 at 488, quoted in Abalos v. Australian Postal Commission (1990) 171 C.L.R. 167 at 178.

Mr Fleming did not, in the end, press the contention that even if the primary judge's findings were upheld, her Honour's judgment could be upset on the basis that there was no relevant duty of care, but it is desirable to discuss the point.

We were referred to a number of authorities dealing with the question whether a vendor's agent has a duty with respect to advice given to the purchaser of property : Roots v. Oentory Pty Ltd [1983] 2 Qd.R. 745, MacCormick v. Nowland (1988) A.T.P.R. 40-852, Richardson v. Norris Smith Real Estate Ltd (1977) 1 N.Z.L.R. 152 and Barrett v. J R West Limited (1970) N.Z.L.R. 789. The question whether such an agent always owes a duty of care in respect of statements made to the purchaser in relation to the subject property does not arise here; the respondent's case was based upon the specific evidence, accepted by the primary judge, that Porter had agreed to check the title out, that he could without difficulty have done so, and that he claimed to have done so, with the result that Francis purchased. The case, on those facts, was one in which Porter knew or ought to have known that Francis relied on him to take reasonable care that the information with respect to title was correct and that Porter knew or ought to have known that Francis might well act in reliance on the information he was given by Porter on that subject : see Shaddock & Associates v. Parramatta City Council (No. 1) (1981) 150 C.L.R. 225 at 231 per Gibbs C.J. It was, although rather hesitantly, argued on behalf of Porter that it was not reasonable for Francis to rely and act upon the information Porter gave him as to the title check, but there appears to us to be nothing in that.

In the end, the point with respect to duty of care comes down to an attack on the factual findings; that failing, so does this ground of appeal. Porter's appeal raises no other point than that with which we have dealt.

Time Limitation

The claim made by Francis against Porter was in time, but it was argued for Whatson that the claim against him was statute- barred. The point was taken below and the learned primary judge concluded that the liability of Whatson to Francis was subject to a contingency which was fulfilled on 10 May 1987 when the boat was seized by the police. Her Honour held that a cause of action by Richards against Francis arose at that point and that Francis then had a cause of action against Whatson. Her Honour therefore concluded that the six year time limit imposed by s. 10 of the Limitation of Actions Act 1974 had not expired when, on 22 December 1992, Whatson was joined.

Mr Fleming contended that Francis' cause of action against Whatson accrued when he bought the boat from Barnes, or if not then, at the latest when he sold it to Richards; both these events occurred more than six years before he was joined in this suit. Mr James Douglas QC, who led Mr Stephens for the respondent Francis, argued that the cause of action against Whatson did not accrue until the absence of title in Francis was established, either by judgment or by some other means such as agreement between all the parties. Mr Douglas contended that until one of these events occurred it was impossible to say that there was any "actual loss", the loss being merely contingent.

Counsel argued the matter on the assumption, which appears to us correct, that the decision of the High Court in Wardley Australia Limited v. The State of Western Australia (1992) 175 C.L.R. 514 is the leading authority, so far as the present problem is concerned.

Wardley's case was an appeal from the Full Court of the Federal Court dealing with an attack on a pleading. At first instance an amendment to a statement of claim had been struck out on the ground that the cause of action pleaded by the amendment was statute barred. Reference to the reasons of French J. in (1991) 28 F.C.R. 68, shows that the case was decided on the pleading -i.e. on the assumption that the allegations made in the original pleading and in the impugned amendment were factually correct. The decision of the High Court, affirming the Full Court of the Federal Court, was that the cause of action asserted by the amendment, which complained of a breach of s. 52 of the Trade Practices Act 1974, was not statute-barred. The High Court's decision is therefore not direct authority on the question of the time at which a cause of action accrues in a suit of the present kind, based on the general law. It is necessary to analyse the pleading in the present case and that is done below, but for present purposes it is enough to say that the question is when Francis' cause of action against Whatson, based on Porter's negligent statements, accrued. Wardley's case has relevance to the present problem because, although directly concerned only with the statutory cause of action, the principal judgment (that of Mason CJ, Dawson, Gaudron and McHugh JJ) contains observations concerning the accrual of causes of action under the general law.

Those observations relate principally to a cause of action in tort bringing about financial, rather than physical, loss and are concerned with the question whether the cause of action accrues when the plaintiff has entered into what appears to be a disadvantageous transaction, but there may in the end be no loss. The principal judgment is authority for the view that under the common law -

"...a plaintiff can only recover compensation for actual loss or damage incurred, as distinct from potential likely damage" (526)

As was pointed out during argument in this Court, the word "actual" may carry a heavy burden. To take a simple case, if negligent mis-statement induces a purchase of property which is immediately on purchase worth less than what was paid for it, it is unclear whether that is an "actual" loss;

after all, the property may ultimately be sold for as much

as was paid for it, or more.

The Court discussed the decision of the English Court of Appeal in Forster v. Outred & Co. [1982] 1 W.L.R. 86, which was a negligent advice case. There the advice induced the plaintiff to execute a mortgage over her property to secure the debts of her son, who subsequently became bankrupt. It was held that the cause of action accrued on execution of the mortgage and that decision was said, in the High Court judgment being discussed, to be :

"...explicable by reference to the immediate effect of the execution of the mortgage on the value of the plaintiff's equity of redemption..."

That appears to us to imply approval of Forster v. Outred & Co, regarded as so based, and supports the generalisation that when the advice is shown to have caused the diminution of the value of a piece of property, that is enough. Perhaps the implication is that the mere incurring of an obligation, of a contingent kind, to pay money is not.

That view of the matter is supported by the treatment of the Full Court of the Federal Court's decision in Jobbins v. Capel Court Corporation Ltd (1989) 25 F.C.R. 226, a case concerning a film investment said to have been induced by misrepresentation. The principal judgment in the High Court pointed out that the Full Court of the Federal Court failed to specify whether the applicant suffered loss on entering into the relevant agreement or on payment of money under it and added :

"The decision itself may be supported by reference

to the payment alone." (529)

We also note the statement expressing disagreement with
certain English cases if they -

"...properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract..."

This, again, suggests that a mere contractual obligation may not be enough to constitute an "actual" loss. Although there may be a difference of view as to what the High Court decision stands for, so far as general law claims are concerned, in our opinion it points in the direction of supporting the following propositions, with respect to a tort causing economic loss but not physical damage :

1.   Merely entering into a contract as a result of the tort, however disadvantageous the contract may be, does not give rise to a cause of action.

2.   Transfer or diminution of the value of property, or expenditure of money, is an 'actual' loss which may be sued for.

It cannot be pretended that one can be confident that these views represent the true interpretation of the principal judgment, but in our opinion the notion of a "actual loss" there spoken of appears to involve the distinction to which we refer.

We turn now to the nature of the pleading against Whatson. It alleged the two sales of the boat and the taking of possession on George's complaint on 30 May 1987. It alleged the failure to check the title and that Porter and Whatson were under a duty to take care in relation to that matter. It did not, except in two minor respects, embody in its particulars any claim against Porter and Whatson; the claim is made in the introductory part and is, as against Whatson -

"...to be indemnified against the plaintiff's claim and the costs of this action including his costs as between solicitor and own client of defending this action and/or damages together with interest thereon on the grounds set out hereunder" Labelling of the cause of action as an "indemnity"

cannot affect the operation of the limitation statute. The cause of action was in substance one for damages for negligence.

Considering Francis' position immediately after having paid the purchase price of the boat, it is difficult to understand the assertion that at that stage he had suffered no loss; he had paid in full for ownership of the boat, but had not acquired it. It is true that subsequent events may conceivably have alleviated his position or even put an end to the loss. But that is so whenever a purchaser pays out money without obtaining title to that for which the payment was made. Apart from any other possibility, the vendor may, on complaint being made, so arrange matters as to secure title to the purchaser. It does not appear to us that this contingency produces the result that no cause of action has accrued; there is an "actual loss" consisting of the money paid over, in intended exchange for property which has not passed.

We can see nothing in Wardley to support the view that the loss must be crystallised before action can be brought, by establishment of the want of title. Nor can we, with respect, agree that the seizure of the boat from Richards (who bought from Francis) caused Francis' loss. It merely deprived Richards of possession of the boat, to which he had no entitlement, and created an enhanced risk that Richards would sue Francis. We are of opinion that Francis was entitled to sue Whatson when he had paid for the boat, so that the proceeding against Whatson was barred by statute;

it was instituted more than 6 years after that payment: s.
10(1)(a) of the Limitation of Actions Act 1974.

In the result, Whatson's appeal succeeds, on the limitation point, and Porter's fails; costs must follow the event, here and below in each case.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Brisbane

Before Mr Justice Pincus Mr Justice Davies Mr Justice Moynihan

[Whatson v Francis and Barnes

Porter v Francis and Barnes]

Appeal No. 61 of 1993

BETWEEN:

STEPHEN NORMAN RICHARDS

(Plaintiff)

AND:

BLAIR FRANCIS

(Defendant) First Respondent

AND:

IAN HAROLD BARNES

(First Third Party)Second Respondent

AND:

KEITH PORTER

(Second Third Party)

AND:

WINSTON WILLIAM WHATSON

(Third Third Party) Appellant

Appeal No. 62 of 1993

BETWEEN:

STEPHEN NORMAN RICHARDS

(Plaintiff)

AND:

BLAIR FRANCIS

(Defendant) First Respondent

AND:

IAN HAROLD BARNES

(First Third Party)Second Respondent

AND:

KEITH PORTER

(Second Third Party) Appellant

AND:

WINSTON WILLIAM WHATSON

(Third Third Party)

REASONS FOR JUDGMENT - DAVIES J.A.

Judgment delivered 12/10/1993

I have had the advantage of reading in draft the reasons of Pincus J.A. I adopt his statement of the nature of the proceedings below and agree with his reasons for thinking that the appeal by Porter must fail and that, were it not for the limitation point, so too would Whatson's appeal. I also agree that Whatson's appeal must succeed on this point.

I shall shortly state my reasons for that conclusion.

The arguments on both sides of this question are fully set out in the reasons of Pincus J.A. and I shall not repeat them. If Francis' cause of action against Whatson arose when he entered into the contract to buy the boat or when he paid the purchase price under that contract, it is statute- barred.

The ratio of Wardley Australia Ltd v. Western Australia (1992) 175 C.L.R. 514 is that where, in consequence of misleading or deceptive conduct (and the same would be true of actionable misrepresentation) by a defendant, a plaintiff enters into a contract and is thereby subjected to a contingent liability to pay money, such a plaintiff generally does not sustain any loss in consequence of entering into that contract, and thereby in consequence of the defendant's conduct, until the contingency is fulfilled.

See at 532, 538, 543-544. However, there is nothing in the joint judgment or in the judgments of Deane or Toohey JJ. in that case which is inconsistent with the view that where, in consequence of misleading or deceptive conduct or actionable misrepresentation by a defendant, a plaintiff pays money under a contract of sale in exchange for property of no value (or of less value than the amount so paid) that plaintiff sustains a loss at the time of making that payment. As the judgment of Brennan J. in that case demonstrates, that view is plainly right (536, 537-538).

It is unnecessary in this case to attempt to state any general principle going beyond that which I have stated and, in the light of the various views expressed by members of the High Court in Wardley, I would not be inclined to do so.

It is sufficient to say that, in this case, because Barnes did not own the boat, Francis received nothing of value in exchange for the sum of $33,500.00 which he paid to Barnes pursuant to the contract of sale; and that Francis' cause of action therefore arose, at the latest, when that payment was made, that is on 18 July 1986.

It is for these reasons that I agree that Whatson's appeal must succeed. I agree with the orders proposed by Pincus J.A.