Grayson v Black - [2010] WASC 117

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: GRAYSON -v- BLACK [2010] WASC 117

CORAM: MASTER SANDERSON

HEARD: 12 MAY 2010

DELIVERED : 2 JUNE 2010

FILE NO/S: CIV 2912 of 2009

BETWEEN: JENNIFER GRAYSON
JENNIFER GRAYSON as trustee for CHRISTOPHER, DANIEL & MICHELLE GRAYSON
Plaintiffs
AND
WARREN BLACK
Defendant

Catchwords:

Practice and procedure - Application by defendant for summary judgment - Claim against solicitor for negligent advice - No evidence advice incorrect - Turns on own facts

Legislation:

Nil

Result:

Summary judgment for defendant

Category: B

Representation:

Counsel:

Plaintiffs: In person
Defendant: Mr S F Popperwell

Solicitors:

Plaintiffs: In person
Defendant: Pynt & Partners

Case(s) referred to in judgment(s):

Grayson v Grayson [2006] FCWA 79

MASTER SANDERSON: This is the defendant's application for summary judgment under O 16 of the Rules of the Supreme Court 1971 (WA). In the alternative the defendant seeks to strike out the plaintiffs' statement of claim. For reasons which follow I am satisfied there should be summary judgment for the defendant.
To deal with this application it is necessary to set out the facts. This summary of the facts is largely taken from a chronology which appears in an affidavit by the first‑named plaintiff sworn 22 April 2005 and filed in this court in action CIV 1530 of 2005. The affidavit appears as annexure JRG9 to one of the first‑named plaintiff's affidavits sworn 16 February 2010 and filed in opposition to this application.
On 7 November 1992 the first‑named plaintiff married Graham Francis Grayson. In 1983 the couple purchased as joint tenants a property at 500 Kenmore Road, Glen Forest (the property). There are three surviving children of the marriage - Christopher Thomas, born 11 August 1986; Daniel James, born 27 August 1988; and Michelle Amy, born 28 September 1989. In 1991 the first‑named plaintiff and her husband separated in 1991.
In 1994 the first‑named plaintiff retained a solicitor, Susan Crisp of Fordhams, to advise her on property settlement and child support issues which arose as a consequence of the separation. On the first‑named plaintiff's instructions Ms Crisp prepared, and the first‑named plaintiff subsequently executed in early 1995, three documents - a child support agreement; a maintenance and child support agreement pursuant to s 86 and s 66ZC of the Family Court Act 1975 (WA); and a declaration of trust.
The child support agreement relevantly provided that:
(a)the property would be subdivided into two parcels, both of which would be transferred to the first‑named plaintiff, the rear lot would vest in the first‑named plaintiff absolutely and the front lot on which the former matrimonial home was located would be held by the first‑named plaintiff on trust for the children; and
(b)upon registration of the document in the Family Court and the transfer of the property to the first‑named plaintiff the husband would pay no further child support.
The s 86 deed provided relevantly that:
(a)upon the subdivision of the property the front lot would be transferred to the first‑named plaintiff to be held by her on trust for the children and the rear lot would be transferred to the first‑named plaintiff absolutely;
(b)on selling the rear lot the first‑named plaintiff would pay the husband $20,000; and
(c)the first‑named plaintiff would execute a declaration of trust in relation to the front lot in favour of the children.
The declaration of trust provided relevantly that:
(a)the first‑named plaintiff held the front lot on trust for the children as tenants in common in equal shares; and
(b)upon Michelle Grayson attaining the age of 21 years - that is 28 September 2010 - the first‑named plaintiff would transfer the front lot to the children as tenants in common in equal shares.
The rear lot was never transferred by the husband and the first‑named plaintiff to the first‑named plaintiff solely. Nevertheless, the objective of disposing of the rear lot was achieved in 1995 when it was sold to a third party for $102,000. Of the sale proceeds $20,000 was paid to the husband and the balance after deduction of costs was paid to the first‑named plaintiff.
In or about December 1997 the first‑named plaintiff instructed Ms Crisp to apply to the Family Court for orders varying the s 86 deed. The variation anticipated the first‑named plaintiff was deemed to hold 25% of the front lot in her own right with the remaining 75% on trust for the children subject to the first‑named plaintiff being entitled to live in the house for the rest of her life. The husband consented to this application. Consequently, on or about 24 December 1997 the Court of Petty Sessions made orders that the s 86 deed be varied by vesting the front lot in the first‑named plaintiff absolutely and having the first‑named plaintiff execute a declaration of trust in relation to the front lot so that the she held 75% of the front lot on trust for the children.
In or about May 1998 Ms Crisp prepared a further declaration of trust. It provided she would hold the front lot in trust for herself and the children as tenants in common in equal shares and that she would have a life interest in the front lot. The first‑named plaintiff executed this declaration of trust. On 28 July 2006 Penny J in the Family Court set aside both the consent orders and the second declaration of trust. I will come back to her Honour's reasons later in this decision.
On 12 December 2002 the first‑named plaintiff filed an application in the Family Court seeking orders against her husband relevantly that the child support agreement be set aside. At the time her solicitor was Mr Arvind Pillay. Mr Pillay sought advice from a barrister Ms Helen Prince. Ms Prince provided written advice dated 4 July 2003. Relevantly that advice was to the effect that:
(a)an appropriate range for a property settlement between the first‑named plaintiff and her husband would have been an 80/20 split in favour of the first‑named plaintiff, the first‑named plaintiff never received anything near this figure under the 1995 settlement and the 1997 variation;
(b)it may be possible to revoke the trust in favour of the children on the basis that it was never the first‑named plaintiff's intention to divest herself of the house on the front lot;
(c)the first‑named plaintiff should apply to vary the child support agreement given the agreement was accepted by the court in 1995 without the court being made aware that Christopher was a child with special needs and the fact that the first‑named plaintiff's financial position had changed considerably since that time; and
(d)Ms Crisp was negligent.
On 8 August 2003 the first‑named plaintiff issued a writ of summons in this court against Sicard Crisp. By letter dated 23 September 2003 Mr Arthur Metaxas of the law firm Metaxas & Vernon (exhibit WSB5 to the affidavit of Warren Stuart Black dated 27 January 2010) acting for the first‑named plaintiff:
(a)provided advice on the first‑named plaintiff's chances of succeeding in the negligent action;
(b)questioned Ms Prince's advice on the prospects of revoking the trust; and
(c)recommended the negligence action be held in abeyance pending the outcome of the Family Court proceedings.
Subsequent to receiving this advice from Mr Metaxas the first‑named plaintiff took what might generally be called taxation advice. She consulted the defendant who was at that time an employee with the firm Brett Davies Lawyers. I pause at this point to note the first‑named plaintiff's case against the defendant is framed in both contract and tort. Insofar as the claim is framed in contract it cannot succeed. There was a contractual relationship between the first‑named plaintiff and Brett Davies Lawyers, but there was no contractual arrangement between the first‑named plaintiff and the defendant. Any claim brought by the first‑named plaintiff against the defendant must be a claim in tort.
On 6 November 2003 the defendant provided written advice to the first‑named plaintiff. Relevantly, that advice:
(a)was not comprehensive because of the complex fact situation and the limited extent of the defendant's retainer;
(b)noted the first‑named plaintiff was asking the court to void the trust and get the front lot transferred to the first‑named plaintiff as originally planned;
(c)said it was unlikely the first‑named plaintiff had a liability for Capital Gains Tax (CGT) arising from the sale of the rear lot in 1995;
(d)said it was unlikely the first‑named plaintiff had a liability to CGT on the transfer of the house on the front lot to the children when she signed the declaration of trust, however, the front lot was acquired at a market value cost base at the time of the transfer meaning the front lot lost it pre‑CGT status and the children may be liable to CGT if they disposed of the front lot;
(e)said it appeared the second declaration of trust was ineffective to transfer a 25% interest in the front lot to the first‑named plaintiff but if that was wrong then CGT may be payable on the transfer but that would need to be further investigated;
(f)said if the result of the Family Court proceedings was the declaration of trust was set aside ab initio CGT was unlikely to be an issue, however, if the Family Court left the declaration of trust in place and adjusted the parties financial positions by making further orders and through that process the first‑named plaintiff came to own the front lot it was likely CGT would be payable and the family residence exemption would not apply - the defendant noted he would need to do a lot more research on this issue to give a full opinion.
It is appropriate now to return to the Family Court proceedings and the decision of Penny J. What follows is taken from her Honour's reasons: Grayson v Grayson [2006] FCWA 79. The decision was published on 28 July 2006.
On 1 February 2005 the first day of trial before Penny J the first‑named plaintiff filed an amended minute of orders. For the first time in the proceedings the first‑named plaintiff sought an order that the s 86 deed and the declaration of trust be set aside. Penny J adjourned the trial so the children could obtain legal advice and so the first‑named plaintiff could commence proceedings in the Supreme Court. The Supreme Court has original jurisdiction under the Trustees Act 1962 (WA). It was anticipated once these proceedings were commenced an application would be made to transfer the proceedings to the Family Court to be dealt with by Penny J.
On 9 May 2005 the first‑named plaintiff filed an originating summons in the Supreme Court to revoke the original declaration of trust and the second declaration of trust. This application was made under s 90 of the Trustees Act. The first‑named plaintiff also sought to transfer these proceedings to the Family Court to be heard in conjunction with the Family Court proceedings.
In an affidavit sworn on 16 February 2010 and filed in support of this action the first‑named plaintiff set out the reasons why she was aggrieved about the existence of the trust. Relevantly these reasons were:
(a)the children would be liable for CGT on the vesting of the trust, and the first‑named plaintiff said the children did not have the resources to pay the tax and neither did she - a copy of the defendant's advice was annexed to the affidavit;
(b)she could not secure child support payments from her husband;
(c)she and the children were denied low income earner Commonwealth benefits;
(d)the value of the trust was insufficient to provide an income or support for the children; and
(e)the children would be denied access to the First Home Owner's Grant.
On 23 May 2005 in the previous Supreme Court action it was ordered that Arthur John Bell (the first‑named plaintiff's brother) be appointed the guardian of the children and transferred the trust application to the Family Court.
On 1 September 2005 the first‑named plaintiff filed in the Family Court a minute of final orders. Essentially the first‑named plaintiff sought:
(a)to set aside the consent orders and the s 86 deed;
(b)orders in terms of the trust application;
(c)upon the making of these orders the front lot be divided as between the first‑named plaintiff and her husband 80/20 in favour of the first‑named plaintiff, and the first‑named plaintiff be awarded an additional 10% adjustment of the property rights; and
(d)the child support agreement be set aside.
On 19 and 20 December 2005 the trial in the Family Court proceedings continued before Penny J. The husband and the children agreed the declaration of trust and the second declaration of trust should be revoked. In other words the trust action commenced in the Supreme Court was effectively conceded by the first‑named plaintiff's husband and her children.
On 15 June 2006 prior to judgment the first‑named plaintiff filed a notice of discontinuance. The first‑named plaintiff sought to abandon:
(a)the application to set aside the s 86 deed;
(b)that part of the trust application relating to the first declaration of trust; and
(c)the property adjustment claim.
Penny J discussed this issue in her judgment:
If this had been the wife's position on 1 February 2005, the trial would have been able to go ahead on that day. I asked the wife to give reasons why she was now discontinuing most of the orders sought by her in relation to property and the Declaration of Trust. In an affidavit sworn by the wife on 4 July 2006 she stated she did not believe that revoking the Trust would confer any benefit to the children that cannot be recovered from other sources. I presume she means by way of damages against Ms Crisp in the Supreme Court. This is a completely different position to her position at trial where she argued strongly that the continued existence of the Trust in favour of the children was not in their interests as they were now severely restricted in any form of Social Security entitlements as a result of their ownership of the property [56].
At Penny J's request on 6 July 2006 the first‑named plaintiff filed a minute of amended orders. On 28 July 2006 Penny J decided:
(a)the consent orders be set aside because they purported to vary the children's entitlement without court approval contrary to s 90 of the Trustees Act;
(b)the second declaration of trust be revoked for the same reason; and
(c)the child support agreement be departed from to burden the husband with the liability for child support from 1 January 2002 and ongoing child maintenance for Christopher.
As I understand the first‑named plaintiff's position she complains the defendant failed to identify that a taxation liability would arise to her from the sale of the rear lot. The defendant advised that no liability arose because the jointly owned rear lot was acquired pre‑1985 and therefore was a CGT free asset. That advice it seems was correct. The first‑named plaintiff does not produce any evidence that she has been visited with a CGT liability in relation to the sale of the rear lot. As the defendant's advice was correct and no claim in negligence in relation to this advice can succeed.
In relation to the front lot the defendant advised there was no CGT liability on the transfer from the husband to the first‑named plaintiff but there may be a CGT liability arising on the transfer to the children and there would be a liability borne by the children when and if the children disposed of the front lot.
As a result of the Family Court proceeding the declaration of trust remains in place and the children remain the beneficial owners of the front lot. The first‑named plaintiff has no CGT liability. The children do have a potential liability when and if the lot is sold. Again, the defendant's advice was correct. It is difficult to see what the first‑named plaintiff is complaining about.
In the end that is the difficulty with the first‑named plaintiff's case. It is difficult to see what it is alleged the defendant did wrong. Even assuming he did something wrong, it was not productive of any loss. To succeed in her claim the first‑named plaintiff must establish that as a consequence of relying on the defendant's advice she suffered loss and damage. It is not possible to identify any damage the first‑named plaintiff suffered as a consequence of the defendant's advice. She may well have suffered some loss and damage in relying on Ms Crisp's advice, but that was the subject of separate proceedings which have now been settled. The first‑named plaintiff has not identified what she did or did not do consequent upon the defendant's advice which was productive of loss. Consequently her claim must fail.
There should be summary judgment for the defendant. The first‑named plaintiff ought pay the defendant's costs of this application and the costs of the action.