Henderson v Buman
[2011] VCC 1523
•19 December 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT BENDIGO
CIVIL DIVISION
DAMAGES AND COMPENSATION
GENERAL DIVISION
Case No. CI-09-05336
| MARK ROBERT HENDERSON | First Plaintiff |
| and | |
| LYNETTE JANE HENDERSON | Second Plaintiff |
| v | |
| JOHN RAYMOND BUMAN | Defendant |
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| JUDGE: | HER HONOUR JUDGE KINGS |
| WHERE HELD: | Bendigo |
| DATE OF HEARING: | 25 November and 10 December 2010 |
| DATE OF JUDGMENT: | 19 December 2011 |
| CASE MAY BE CITED AS: | Henderson & Anor v Buman |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1523 |
REASONS FOR JUDGMENT
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Catchwords: Professional negligence – advocates’ immunity – loss of opportunity – contract for sale of business.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr P G A Montgomery | Beck Legal Pty Ltd |
| For the Defendant | Mr J O’Bryan | Lander & Rogers |
| HER HONOUR: |
1 The first and second plaintiffs were the owners of a motel business called the “Calder Motel” situated at 296-298 High Street, Kangaroo Flat in Victoria. Mr Henderson was responsible for negotiating the sale of the business and instructing in the Magistrates’ proceeding and this proceeding.
2 The plaintiffs leased the premises from Kezine Pty Ltd (“the landlord”). Mr Horwood is a director of that company.
3 Dickens Real Estate Pty Ltd (“Dickens”) was engaged by the plaintiffs as the selling agent of the motel business.
4 The plaintiffs sold the motel business to Mr and Mrs Atkinson (“the purchasers”). Mr Atkinson gave evidence on their behalf. Subsequently, the purchasers brought proceedings against the plaintiffs and Dickens in the Magistrates’ Court, alleging breach of contract and a claim for damages for breach of the Fair Trading Act 1999 (Vic) for misleading and deceptive conduct, in that the plaintiffs represented to the purchasers that the leasehold carried two further terms to those listed on the lease bringing the effective total duration of the lease to twenty five years. The purchasers were successful in the Magistrates’ Court. The plaintiffs were found to have engaged in misleading and deceptive conduct to the purchasers, to the effect that the plaintiffs had obtained the consent of the landlord to the provision of, in effect, a twenty-five-year lease term for the premises, taking into account options.
5 The defendant is the sole partner of the firm John Buman & Co (“Bumans”), solicitors in Bendigo, who acted for the plaintiffs in the sale of the business and in the Magistrates’ Court proceedings which arose out of the sale of the business. Within Bumans, Mr Sutton was the solicitor acting in respect to the conveyancing file. Mr Chay was the litigation solicitor retained to conduct the plaintiffs’ defence in the Magistrates’ Court proceeding brought by the purchasers.
The Current Proceeding
6 In this proceeding, the plaintiffs allege that the defendant was negligent in acting for them in respect to two retainers. The first retainer was in relation to the sale of the business. The second retainer was in relation to the defence of the Magistrates’ Court proceeding.
7 In respect to the first retainer, the plaintiffs allege that the defendant owed the plaintiffs a duty of care as their solicitors to ensure the sale of the business was in accordance with instructions received from the plaintiffs. The plaintiffs allege that the defendant breached that duty of care by:
(a) Preparing the contract of sale of business with two additional option terms for the lease without contacting the landlord or obtaining written confirmation of the two further option terms. (b) Failing to advise the plaintiffs they had a verbal agreement to provide the two further options, which was unenforceable unless reduced to writing. (c) Failing to check the transfer of lease was consistent with the contract of sale and to advise the plaintiffs accordingly before the plaintiffs signed it. (d) Failing to contact the landlord to confirm the terms upon which it would be prepared to grant the two further option terms. 8 In respect to the second retainer, the plaintiffs allege that the defendant owed the plaintiffs a duty of care to ensure, before advising them to defend the claim by the purchasers, the plaintiffs had reasonable prospects of defending the purchasers’ claim and reasonable prospects of succeeding on the appeal following the judgment for the purchasers in the Magistrates’ Court. The plaintiffs allege the defendant breached his duty of care negligently in:
(a)
Failing to advise the plaintiffs in relation to the potential conflict of interest and failing to obtain independent legal advice in respect to same.
(b) Filing a Notice of Defence. (c)
Failing to advise the plaintiffs that the purchasers’ solicitor may have been negligent in preparing the transfer of lease, but that that would not prevent the purchasers being successful in their claim against the plaintiffs because the plaintiffs had had the opportunity to correct the inconsistency between the transfer of lease and contract of sale.
(d)
Failing to advise the plaintiffs that the purchasers were not restricted to the right to withdraw from the contract of sale, but could in fact still sue for damages if the inconsistency between the contract and the transfer of lease had been identified but the landlord declined to extend the lease.
(e)
Failing to contact Mr Horwood in a timely manner and to ascertain that he would give evidence that there had not been an agreement for two further options.
(f)
Failing to advise the plaintiffs that the assessment of damages of the purchasers’ experts would be accepted in the absence of any other evidence.
(g)
Failing to put Mr Henderson’s version of the verbal agreement to Mr Horwood in cross-examination.
(h)
Advising the plaintiffs that they had a prospect of success on an appeal on a matter of law when the Magistrate had found on the facts that the purchasers had relied on a misrepresentation by the plaintiffs.
9 Due to the defendant’s breach of duty of care and/or the defendant’s negligence, the plaintiff suffered loss and damage. The plaintiffs claim damages representing:
(a)
Costs and disbursements paid to the defendant in relation to the Magistrates’ Court claim and the subsequent appeal in the sum of $17,331.10.
(b)
Costs and interest paid to the purchasers in accordance with the judgment and subsequent appeal, a total of $77,112.33.
(c)
Costs paid to the plaintiffs’ solicitors, Beck Legal, on the appeal of $14,660.
(d)
The loss of opportunity before settlement of the contract of sale of the Business to negotiate with the landlord for the grant of two further options in return for an agreement of a rent increase and annual rent reviews in accordance with the CPI that would have enabled the plaintiffs to obtain $228,000 from the purchasers as the purchase price instead of the effective $131,000 received ($231,000 less judgment of $100,000, a difference of $87,000).
10 In relation to the sale of the business, the defendant said it was not negligent because it was acting on the instructions of Mr Henderson that the landlord had agreed to provide two extra options of six years. Even if the defendant was negligent, no claim can be sustained by the plaintiffs, because Mr Henderson cannot prove he suffered loss caused by any negligence of the defendant.
11 In relation to the Magistrates’ Court proceeding, the defendant relied on the advocate’s immunity insofar as the claim is made against Mr Chay, because Mr Chay was engaged to run the defence of the plaintiffs’ case in the Magistrates’ Court and in doing that, all the work that he did was covered by the advocate’s immunity. This is because, all the work that was done related to the way in which the case was run in the Magistrates’ Court.
General Observations as to the Proceedings
12 The proceeding was conducted on behalf of the plaintiffs as if there was one retainer. In fact there were two retainers, the retainer in relation to the sale of business which involved Mr Sutton as solicitor. The second retainer related to the defence of the Magistrates’ Court proceeding. Mr Chay was the litigation solicitor who acted for the plaintiffs. Both Mr Sutton and Mr Chay were solicitors employed by the defendant.
13 By the time this proceeding commenced, the plaintiffs (Mr Henderson) had given evidence in the Magistrates’ Court proceeding as had the other key witnesses, Mr Atkinson and Mr Horwood.
The Plaintiffs and their Witnesses
Mr Henderson
14 Mr Henderson gave his evidence-in-chief in a confident manner. In cross- examination, he continually said he could not recall matters. In fact he said “I do not remember half the stuff that happened here yesterday”,[1] on another occasion he said “I have trouble remembering what happened last week”.[2]
[1] Transcript 76
[2] Transcript 74
15 Comments such as these did not assist his case, given the fact that his evidence related to events six years ago. I formed the view that his memory of events was not good. He denied saying things to Mr Sutton which clearly he said, in particular instructions about a rent review which were contained in a contemporaneous file note of Mr Sutton. He did not listen to questions and often gave an inappropriate answer. I was unsure whether this was deliberate or because he had difficulty understanding what was required of him.
16 This reflected poorly upon his general credibility. He said on a number of occasions he had done nothing wrong, despite the fact that the Magistrate found he engaged in misleading and deceptive conduct. He tried to convey to the Court that he was a simple person who did not understand commercial documents. He said he could not read leases and relied on his accountant. I formed the view that he was more knowledgeable than he portrayed in Court.
17 He struck me as a person who engaged a professional and considered his job was done. He in fact made such a statement to the Court.
Mr Atkinson
18 The purchaser of the business gave evidence about discussions leading to the purchase of the business, the Magistrate’s Court proceeding and the events following that proceeding. I accept his evidence as truthful.
Mr Horwood
19 The landlord gave evidence of his initial discussion with Mr Henderson in respect to additional options, what he said in the Magistrates’ Court proceeding and the additional option he granted to the purchasers. He answered questions in a direct manner. He impressed me as providing a truthful account of what occurred.
Mr Johnson
20 Mr Johnson, solicitor, gave expert evidence about what a prudent solicitor would have done in the circumstances. His evidence is of limited value because first, it was not always clear whether his evidence was what he would do in the circumstances as opposed to a prudent solicitor. Secondly, his evidence was about protecting the solicitor and not discharging the duty to the client. He was a truthful witness.
Mr Waters
21 Mr Waters, Valuer, gave expert evidence on the value of the business. His evidence was not challenged.
The Defendant’s Witnesses
Mr Sutton
22 Mr Sutton was the solicitor who handled the conveyancing transaction. He gave his evidence with the assistance of his file notes – his normal practice – and recollection of events, which was relatively good. He answered questions directly and made concessions. He was a witness of truth.
Mr Chay
23 Mr Chay was the solicitor who represented the plaintiffs in the defence of the Magistrates’ Court proceeding. He was confident in answering questions. At times his responses to questions were inappropriate or irrelevant. He was keen for the Court to know that there were more file notes than what was contained in the Court Book. In answering questions, he had a good recollection of events. I formed the view that he was a truthful witness.
Factual Background
Pre-settlement
24 In early 2004, the plaintiffs decided to sell their business of the Calder Motel with the lease. The period of the existing lease at that time was a term of six years, commencing on 1 November 1999, with two further options of six years each. It was agreed that at the time of selling there were thirteen years to run on the lease. The business had been on the market for approximately six months.
25 Mr Henderson said that he was advised by an agent (other than Dickens) that if he had a longer lease the business would be more saleable. He rang Mr Horwood and asked for an extra three options of six years each. Mr Henderson said Mr Horwood agreed to an extra two options of six years each, but that there would be a trade-off, in that the rent increase would be linked to CPI. Mr Henderson said he thought the CPI increase was 3 per cent and that did not make much difference in the rent.
26 Mr Horwood agreed that he was contacted by Mr Henderson on one occasion about providing further options on the lease. He said he was willing to negotiate but that no agreement was reached. He said there would need to be trade-offs and concessions. Mr Horwood’s evidence was consistent with what he said in the Magistrates’ Court, which was accepted. Mr Horwood said “…the conversation with Mr Henderson was about how I felt about extending the lease, the opening conversation”.
27 I find that, as a result of the telephone conversation between Mr Horwood and Mr Atkinson, there was no agreement by Mr Horwood to grant two extra options of six years each.
28 The plaintiffs engaged Ms Tanya Leslie of Dickens to sell the business. Mr Henderson said he told Ms Leslie that the landlord had agreed to two extra options of six years each. In cross-examination, he said he told Ms Leslie he had twenty-five years because he believed he had twenty-five years to sell.
29 Mr Atkinson, one of the purchasers, said the business was advertised on the internet with a long lease. In about September 2004, he contacted Ms Leslie, the estate agent, and was told that the motel had an effective thirteen-year lease with two additional options. He met with both Ms Leslie and Mr Henderson at the motel. When he was at the motel, he asked about the lease. He was told by Ms Leslie, after she had had some discussion with Mr Henderson, it was thirteen years with two additional options. Mr Henderson said words to the effect “I have got those two extra terms. They will be there on the day”.[3]
[3] Transcript 127
30 I accept that Mr Henderson did tell Ms Leslie and Mr Atkinson that the landlord had agreed to two extra options of six years each. He did not tell them that the options were conditional upon trade offs or concessions. Mr Henderson innocently believed that Mr Horwood had granted the two extra options.
The Conveyancing Transaction
31 The evidence of Mr Henderson and Mr Sutton was inconsistent in relation to the conveyancing transaction.
32 Mr Henderson said that after he spoke to Mr Horwood he went and saw Mr Phillip Sutton, a solicitor at the firm of the defendant, and told him about his discussion with Mr Horwood. Mr Henderson said he did not have a written agreement with Mr Horwood, he though that was Mr Sutton’s job.
33 Mr Henderson was vague about when he spoke to Mr Sutton. In cross examination he was unable to recall dates, nor could he remember chronology of events. He said he could not remember what he said in Court the previous day. To that extent his evidence was unsatisfactory. Accordingly, I rely upon the contemporaneous file notes of 3 and 5 November 2004 made by Mr Sutton as evidence of the dates upon which Mr Henderson contacted Mr Sutton.
34 I find that Mr Henderson made the representations to the purchasers before he engaged Mr Sutton to act in the sale of the business. This was the finding in the Magistrates’ Court. The evidence is that he told Ms Leslie in September 2004 that the landlord had agreed to two extra options of six years each; he had the twenty-five years. The evidence of Mr Atkinson was the motel was advertised on the internet with a long lease. Further, Mr Atkinson said he was told by Ms Leslie in September 2004 that the lease had thirteen years and two additional options. The evidence is that Mr Sutton was not instructed to act “until 3 November 2004”, when he was told the business had been sold.
35 Mr Henderson was referred to Mr Sutton’s file notes of 3 November, Mr Sutton’s first record of a telephone conversation with Mr Henderson, and 5 November Mr Sutton’s record of Mr Henderson attending Mr Sutton’s office. Mr Henderson’s evidence was that he told Mr Sutton that he had a conversation with the landlord, who agreed to grant two extra options and that there were to be trade offs, that the rent increase would be linked to CPI. Mr Henderson did not recall Mr Sutton asking him if the agreement was in writing, or any questions about the arrangement. He said there was no discussion about either he or Mr Sutton contacting the landlord. Mr Henderson agreed Mr Sutton discussed with him a draft contract of sale. He agreed that in accordance with his instructions Mr Sutton wrote the note on the bottom of Schedule C which said:
“The landlord has agreed to 2 further options of 6 years each”
36 Mr Henderson told Mr Sutton that the landlord wanted to change the rent review provisions of the lease. As he had only learned about market reviews at his new motel, he did not tell Mr Sutton the details of the rent review.
37 Mr Henderson was told that Mr Sutton would say that on 16 December 2004 Mr Henderson confirmed that the landlord had agreed to two more options of six years. Mr Henderson responded:
“Yes, well, he may – I did find out that the landlord had agreed to two extra terms of six but I don’t know how many times I said it but I’m pretty sure I only said it once and that was the day that he wrote it down on that bit of paper.”[4]
[4] Transcript 87
38 Mr Sutton’s evidence was that on 3 November 2004, Mr Henderson contacted him regarding the sale of the business. Mr Sutton said Mr Henderson told him he had sold his motel business. Mr Henderson told him Dickens was the selling agent and that Mr Sutton would receive a letter from Dickens with instructions in relation to the sale of the business. Mr Sutton’s file note of 3 November 2004 recorded that Mr Henderson told him of an amendment to the lease; Mr Henderson was to contact the landlord because there may be a change in the rent. I accept Mr Sutton’s evidence as it was consistent with his file note. The file note was a record of what he was being told by Mr Henderson.
39 Mr Sutton said that Mr Henderson attended his office on 5 November 2004, at which time he sought Mr Henderson’s instructions to complete the contract of sale and Schedule C (the details of lease). Referring to his file note, Mr Sutton said they discussed the current lease of the business premises. His usual practice was to have a copy of the lease at the interview to discuss with the client in order that he could complete a draft of the contract of sale and Schedule C, which he would get typed as the first draft. He remembered doing this. He said a discussion took place about the rent. Mr Henderson said there had been an increase of rent of 15 per cent just prior to the sale which he had paid. There had not been an increase for three years.
40 Mr Sutton said they had a discussion about the landlord. Mr Henderson instructed that the landlord wanted to change the rent provisions of the lease to four per cent annually. He said his note said “4 per cent each year for two years and then market review in the third year”.
41 Mr Sutton was informed that Mr Henderson denied discussing with Mr Sutton the landlord’s desire to change the rent provisions of the lease. Mr Sutton said he disagreed with Mr Henderson. He said “I am very clear on it”.
42 I accept Mr Sutton’s evidence that Mr Henderson told him that the landlord wanted to change the rent provisions of the lease to a four per cent increase each year for two years and market review on the third year. Mr Sutton could not have obtained this information from any other source. It was contained in his file note of the conference with Mr Henderson on 5 November 2004. Mr Sutton said he was very clear that Mr Henderson provided those instructions.
43 Mr Sutton said Mr Henderson’s instructions were that the landlord agreed to two further options of six years.
44 Mr Sutton said he had a conversation with Mr Henderson about the significance of that instruction. He said he explained to Mr Henderson that it was important that he be sure that Mr Horwood agreed to this, because it had to go in the contract. He said Mr Henderson told him that is what Mr Horwood and he agreed upon and words to the effect that it was clear that the deal had been done. Mr Sutton said it was clear to him that prior to the conference Mr Henderson had a meeting with Mr Horwood when they discussed rent increases, rent reviews and the extra options. Mr Henderson and Mr Horwood both gave evidence that there was a telephone discussion. I accept that Mr Sutton assumed, incorrectly, that there was a meeting.
45 Mr Sutton said he had a conversation with Mr Henderson about Mr Sutton contacting the landlord. Mr Henderson told him there was no need for him to contact the landlord. Mr Sutton said, as an experienced lawyer, he knew what Mr Henderson was telling him was important to the sale of the business; he wanted to make sure there was no need for him to contact the landlord. He told Mr Henderson of the importance of this information. Mr Sutton said he was clearly instructed that there was no need for him to contact Mr Horwood. Mr Sutton was not sure that he told Mr Henderson that he (Mr Sutton) thought he should contact the landlord.
46 Mr Henderson denied Mr Sutton asked to contact the landlord.
47 It was put to Mr Sutton that Mr Henderson’s evidence was that he told Mr Sutton in this conference that the further options were conditional upon the rent increases. Mr Sutton said he could not recall that specifically, but that may well be correct.
48 I accept Mr Sutton’s evidence about the conversations with Mr Henderson about contacting the landlord. He conveyed to me the importance of this information in relation to the contract. It follows I do not accept Mr Henderson’s evidence on this point. I accept that Mr Sutton was instructed by Mr Henderson not to contact the landlord.
49 I accept that Mr Henderson did not say to Mr Sutton that the grant of the two extra options by Mr Horwood was conditional on trade offs. (Mr Henderson’s evidence was that the trade off was a rent increase which would be linked to CPI and he thought that made no difference.)
•
First, there was no record of the extra options being conditional on trade offs in the file notes of Mr Sutton;
•
Secondly, there was no reference in the file note to CPI. The file notes refer to rent increases, but not CPI;
•
Thirdly, there was no evidence from any witness that Mr Henderson told anyone that the extra options were conditional on trade offs. He did not tell the agent, I can infer he did not tell the purchasers because they believed they had the options;
• Fourthly, there was no increase in rent on the sale of the business. 50 Mr Sutton prepared the contract of sale, including a note in Schedule C that:
“Landlord has agreed to two (2) further option terms of six (6) years
each.”
51 The contract of sale did not include any other changes to the lease agreement, such as changes to the rent.
52 Mr Sutton was taken to a handwritten file note dated 16 November 2004 in relation to a conference with Mr Henderson. Mr Sutton said he had prepared a draft of the contract of sale and he asked Mr Henderson to come in to go through the draft with him. Mr Sutton said he asked for confirmation that the landlord agreed to two more options of six years because he was concerned to know it was definitely under control. He said Mr Henderson told him he had it under control and did not want him to do anything more about it; that is, check with Mr Horwood.
53 I accept that Mr Henderson confirmed that the options had been granted in the conference on 16 November 2004.
54 The contract of sale was signed by the purchasers on 29 November 2004 and by the plaintiffs on 8 December 2004.
55 The transfer of lease document was prepared by the purchasers’ solicitor and sent to Mr Sutton under cover of a letter dated 22 December 2004. On 4 January 2005, Mr Sutton wrote to the plaintiffs enclosing the documents received by the purchasers’ solicitor and requesting the plaintiffs to attend a meeting with him on 5 January 2005 to discuss the matter and sign the necessary documents.
56 Mr Sutton said the transfer of lease was prepared by the purchasers’ solicitor. He agreed that he did not advise the plaintiffs that the transfer of lease did not include the two additional options referred to in Schedule C of the contract of sale. He said he usually checked the transfer of lease for accuracy. He said he could not recall whether he did. He said the purchasers’ solicitor and the landlord may have made other arrangements in respect to the two extra options referred to in the contract of sale, or may not have required the extra options. He agreed he did not take any steps to determine whether that was the case.
57 The transfer of lease was executed as a deed on 11 January 2005. The transfer of lease did not include the two further option terms noted in the contract of sale.
58 On 10 January 2005, Mr Sutton wrote to Joliman Lawyers, the solicitor for the purchasers. He enclosed Answers to Requisitions, which he prepared based on instructions, and the Disclosure Statement signed by the plaintiffs pursuant to section 61(4) of the Retail Leases Act 2003 (Vic). He agreed that he prepared the Disclosure Statement using a copy of the original Lease and that it did not include the extra two options.
59 On the same day, Mr Sutton sent a letter to the directors of the landlord enclosing the transfer of lease prepared by Joliman Lawyers for execution.
60 Settlement occurred on 14 January 2005. The transfer of lease took effect on 14 January 2005.
Post-settlement
61 On 17 October 2005, Bumans received a letter of demand from the purchasers’ solicitor informing it that the plaintiffs had made a representation about the length of the lease being for twenty-five years when in fact the lease was for a period of thirteen years.
62 Mr Sutton sent a letter to Mr Henderson dated 17 October 2005 enclosing a copy of the letter received from the purchasers’ solicitor and suggesting that Mr Henderson should contact the landlord to see whether it was agreeable to provide the two further optional terms of six years each in favour of the purchasers.
63 Mr Henderson agreed he received a letter from Mr Sutton dated 17 October 2005. He spoke to Mr Horwood, who refused to negotiate with him as he was no longer the tenant.
64 On 21 October 2005, Bumans sent a letter to the purchasers’ solicitor denying that the plaintiffs had made any misrepresentation to the purchasers and suggesting that the purchasers make contact with the landlord in relation to the further options. Bumans sent a copy of that letter to Mr Henderson. Bumans forwarded a further letter to Mr Henderson on 23 November 2005 informing him that there had been no response from the purchasers’ solicitor and requesting to know if there was any further action that he required.
65 Mr Henderson agreed that he did not seek any further advice on the issue or provide Bumans with any further instruction.
66 The Magistrates’ Court proceeding was issued on 22 June 2006.
The Magistrates’ Court Proceeding
67 Mr Henderson received the court documents, which were referred to Mr Chay at Bumans. Mr Henderson said he was advised to defend the proceeding. He could not recall what advice he received in relation to Dickens’ role in the proceeding or whether he was told anything about the evidence Mr Horwood would give in the Magistrates’ Court. He agreed that the matter proceeded in the Magistrates’ Court because he wanted to defend it; he said he had not done anything wrong. He defended the proceeding because the landlord had agreed to the extra two options. He did not ask Mr Chay what his chances of winning the case were. The defence was run according to his instructions. He said he thought Mr Chay did a good job.
68 On 11 and 30 August 2006, the solicitor acting for the purchasers took the view that there was a potential for a conflict of interest if Bumans represented the plaintiffs in the Magistrates’ Court proceeding. Mr Henderson agreed Mr Chay discussed the issue with him and Mr Chay said he could not see a conflict.
69 Bumans took the view that there was no conflict of interest. On 5 September 2006, Bumans wrote to the purchasers’ solicitor seeking further information in relation to the issue. There was no further correspondence on the issue between the respective firms.
70 It was not in dispute that Mr Chay discussed with Mr Henderson the issue of a conflict of interest in Bumans continuing to act. Mr Chay said it was for Bumans to determine whether a conflict existed. He considered whether he should refer the matter to another firm of solicitors to give independent advice on the issue before proceeding. He could not recall whether he discussed it with his principal. He came to the view that as no allegation was made against Bumans in the Magistrates’ Court proceeding, there was no conflict. Mr Henderson instructed Mr Chay to act on his behalf.
71 Mr Chay said that Mr Henderson instructed him that the landlord had agreed unconditionally to two further terms of six years. He denied that Mr Henderson had instructed him that the landlord was only prepared to grant the two additional options on condition that there were trade-offs, including an increase in rent. He said he was shocked when, during cross-examination, Mr Henderson made that concession, because it did not reflect the instructions Mr Chay received.
72 Mr Chay advised Mr Henderson of the existence of the letter dated 27 October 2005 sent by Mr Horwood to Mr Atkinson in which he denied any agreement with Mr Henderson to extend the options of the lease of the Calder Motel. Mr Henderson insisted that there was an agreement. Mr Chay said he sought instructions from Mr Henderson to resolve the proceeding, but Mr Henderson wanted to defend the proceeding. The Court Book included file notes which referred to discussions Mr Chay had with Mr Henderson in relation to settlement. Mr Chay agreed he had a discussion with Mr Horwood on 7 May 2007, two days before the Magistrates’ Court proceeding. He said there was an earlier discussion and this was the follow-on, but there were no notes of the earlier discussion. Mr Chay said it was common ground that there was no written confirmation of Mr Henderson’s agreement with Mr Horwood.
73 On 20 December 2007, the Magistrate found that the plaintiffs had breached section 9 of the Fair Trading Act 1999 (Vic) by engaging in misleading and deceptive conduct in connection with the sale of the business of the Calder Motel in Bendigo. The plaintiffs were ordered to pay the purchasers $100,000 together with interest and costs.
74 Mr Chay informed Mr Henderson of his right to appeal the decision and he obtained instructions to brief counsel to consider the prospects of an appeal. Mr Chay briefed Mr Darryl Williams to settle the notice of appeal, which was lodged on 21 January 2008.
75 On 14 April 2008, Mr Henderson informed Mr Chay that he was considering an action against Bumans if the appeal was unsuccessful. Mr Chay advised Mr Henderson to seek independent legal advice. Beck Legal took over the conduct of the appeal on behalf of Mr Henderson.
76 The appeal was unsuccessful.
Evidence of Mr Johnson
77 Mr Johnson, solicitor, an accredited specialist in property law, provided an expert report at the request of the plaintiffs’ solicitor dated 24 March 2010 and gave evidence. Mr Johnson said that at the time he prepared his report, he was not briefed that Mr Henderson had instructed Mr Sutton not to contact the landlord. Mr Johnson said that in that circumstance he would not have contacted the landlord, but that he would have confirmed in writing it was Mr Henderson’s instruction not to contact the landlord. The reason was to protect his position as a solicitor.
78 Mr Johnson said the common practice is for the purchaser’s solicitor to submit the transfer of lease in draft form to the vendor’s solicitor for approval. Mr Johnson said if he was acting for the plaintiffs, he would have ensured that the transfer of lease included the variation, namely, the two extra options, before it was signed because the landlord is a party to the transfer of lease.
79 Mr Johnson said a prudent solicitor, having received instructions that the landlord had verbally agreed to a variation in the lease, would have included a special condition rendering the contract subject to the landlord agreeing to vary the lease to provide for the variation. He said his opinion had equal application to the solicitor representing the purchaser. I do not accept that opinion given the following:
• the evidence of Mr Henderson that the agreement was in place, •
there was no instruction that the contract of sale was to be conditional upon the variation of the lease, and
•
the evidence was that Mr Henderson had purchased another business which was due to settle at or about the same time as the business the subject of this proceeding; which was not put to Mr Johnson.
Analysis
Conduct of the Conveyancing Transaction
80 It was not disputed that the defendant owed a duty of care to the plaintiffs to ensure the sale of the business was in accordance with the instructions received from the plaintiffs.
81 What was in dispute was whether Mr Sutton breached his duty.
Preparation of the Contract of Sale
82 The plaintiffs submitted Mr Sutton breached his duty by preparing the contract of sale of business with two additional option terms for the lease without contacting the landlord or obtaining written confirmation of the two further option terms.
83 I accept the instruction of the plaintiffs to Mr Sutton was not to contact the landlord. I accept the evidence of Mr Sutton that he informed the plaintiffs that this was important. The evidence of Mr Johnson was that if he was told not to contact the landlord he would not have done so. Mr Sutton prepared the contract of sale in accordance with the plaintiffs’ instructions. As such, I do not accept that Mr Sutton breached his duty of care to the plaintiffs.
Advice regarding verbal agreements
84 The plaintiffs submitted Mr Sutton breached his duty by failing to advise the plaintiffs they had a verbal agreement to provide the two further options, which was unenforceable unless reduced to writing.
85 The evidence of Mr Horwood, which was accepted by the Magistrates’ Court, was that there was no agreement to provide further options. Mr Sutton’s evidence was that he did not advise Mr Henderson the agreement needed to be in writing because he was certain that there was an agreement.
86 Counsel for the defendant submitted that under section 16 of the Retail Leases Act 2003 (Vic), a lease must be in writing signed by the parties, but a
Failing to contact the landlord
87 The plaintiffs submitted Mr Sutton breached his duty by failing to contact the landlord to confirm the terms upon which it would be prepared to grant the two further option terms.
88 As discussed in paragraph 83 above, I accept that Mr Sutton’s instructions from Mr Henderson were that he was not to contact the landlord. As such, I accept that Mr Sutton has not breached his duty of care to the plaintiffs in this regard.
Advice regarding the Transfer of Lease
89 The plaintiffs submitted that Mr Sutton breached his duty by failing to check that the transfer of lease was consistent with the contract of sale and to advise the plaintiffs accordingly before the plaintiffs signed it.
90 It was accepted that the transfer of lease was prepared by the purchasers’ solicitor and did not include the two extra options referred to in Schedule C of the contract of sale.
91 Mr Sutton’s evidence was he usually checked the transfer of lease for accuracy, but he could not recollect whether he did so on this occasion.
92 Mr Johnson’s evidence was that if he was acting for the vendor he would have ensured that the transfer of lease included the variation, namely the two extra options, before the vendor signed the transfer of lease.
93 I accept that it was the purchasers’ solicitor’s responsibility to include the extra two options in the transfer of lease. I accept that Mr Sutton, as solicitor for the plaintiffs, should have brought to the plaintiffs’ attention that the transfer of lease did not include a variation of the lease to include the two extra options that had been referred to in Schedule C of the contract of sale. It was clear that it was important to the sale that the plaintiffs obtain the landlord’s consent to the extra options. In reaching this conclusion I note the requirements of General Conditions 5.2 and 5.3 of the contract of sale.
94 I accept that, in failing to identify the inconsistency between the contract of sale and the transfer of lease, Mr Sutton breached his duty to the plaintiffs.
95 Counsel for the plaintiffs submitted that if the inconsistency in the transfer of lease had been identified then Mr Sutton would have advised the plaintiffs not to sign the transfer of lease, the question of the options could have been sorted out at that time, and the further options could have been negotiated with the landlord, subject to trade offs and most likely the purchase of the business would have proceeded at a lower price. In the pleadings this was characterised as a loss of opportunity.
96 Counsel for the defendant submitted that the damage being claimed in this case was a loss of a commercial opportunity as summarised by Keifel J in Tabet v Gett.[5] I do not accept this submission. Counsel for the plaintiff did not plead loss of a commercial opportunity but rather a loss of chance to renegotiate. Loss of a commercial opportunity is a defined loss; whereas, the loss of opportunity claimed in this proceeding is a more general form of damage.
[5] (2019) 240 CLR 537 at [135]-[137]
97 I accept that Mr Sutton’s conduct was responsible for the plaintiffs loosing the opportunity to renegotiate the lease and sale of business.
98 I accept the submission of counsel for the defendant that the chances of Mr Horwood agreeing to the arrangement that Mr Henderson had represented to the purchasers was not great. The evidence was Mr Horwood wanted an increase in rent in the current lease. He was not going to agree to additional options without a trade-off. Mr Henderson went to Mr Horwood to negotiate further options after the transfer of lease was signed. Mr Horwood refused. I accept that Mr Horwood refused at that time, because Mr Henderson was no longer the tenant. Mr Horwood’s evidence was that he probably would have negotiated with Mr Henderson “pretty hard”. He would have been amenable to an extension but it was less negotiable. He said he would have wanted the rent brought up to market and annual fixed reviews. The evidence was that after the Magistrates’ Court hearing, Mr Atkinson negotiated an extra option with Mr Horwood. Mr Atkinson said:
“It cost us … He had us over a barrel.”[6]
[6] Transcript 131
99 Mr Atkinson’s evidence on how he would have proceeded was confusing and contradictory. For example, in examination-in-chief he said if there was a $4,000 per annum increase in rent he would have offered $14,000 less for the business.[7] In cross examination he said he would not have purchased the business if the rent was increasing $4,000 annually.[8] Mr Atkinson said if a renegotiation of the sale had been required, it would not have been ideal but he possibly would have proceeded with the purchase.[9]
[7] Transcript 124
[8] Transcript 133
[9] Transcript 133
100 I accept that Mr Atkinson would probably have negotiated but any rent increase he had to pay would have been reflected by a reduction in the purchase price he paid for the business. Mr Atkinson impressed me as a witness who understood the viability of the business. He would have negotiated to his advantage.
101 On the balance of probabilities, I am satisfied, but for the conduct of Mr Sutton, the plaintiffs would have been able to negotiate the extra two options but on terms that would have resulted in a reduction on the purchase price.
102 Mr Henderson’s evidence as to the price he would have accepted for the sale of the business was –
[10] Transcript 72
A: “… We would have dropped it a few thousand dollars. Q: How many?--- A: A few thousand, ten, fifteen, maybe twenty thousand.”[10]
103 I accept this evidence was given with the benefit of hindsight. Mr Henderson did not impress me as a witness who readily made concessions. However, Mr Henderson would not have been in a strong bargaining position. He was approximately eight to nine days out from settlement. He had made a representation that he could not fulfil. He had purchased another business, which was due to settle at about the same time as the business the subject of this proceeding. His business had been on the market for about six months before he found a purchaser.
104 Any negotiation would have been conducted in a limited time frame. I accept that Mr Atkinson and Mr Horwood would have used their strong bargaining position to their advantage. Taking all the evidence into account I think a settlement would have been achieved but with Mr Henderson suffering a loss on the purchase price of the business.
105 Mr Henderson said that he would accept a lower figure on the business up to $20,000. The evidence for the plaintiffs was that the value of the business without the two additional options would be reduced from $231,000 to $228,650 (Mr Water’s evidence). I accept that no matter the value of the business, no one was going to pay its value in the circumstance that the plaintiffs were in. I accept that they would have accepted $210,000 for the sale of the business. I accept that given the number of parties and the contingencies it is appropriate that the damages be reduced by 25 per cent.
Conduct of the Magistrates’ Court Proceeding (the litigation)
106 The plaintiffs pleaded that the defendant advised them that the Magistrates’ Court claim against them could be defended and to appeal the decision of the
107 The defendant denied the allegation of negligence made against him and said the allegations constituted either work out of court leading to decisions affecting the conduct of a case in court, or work intimately connected with the conduct of the Magistrates’ Court proceeding and the subsequent appeal to the Supreme Court.
108 It was accepted by both parties that the defendant owed a duty of care to ensure that before advising them to defend the proceeding the plaintiffs had a reasonable prospect of success in the defence and in any subsequent appeal.
109 It is important to identify the nature and extent of the retainer of the solicitor in determining whether or not the solicitor has acted negligently. Mr Chay was the solicitor who acted for the plaintiffs in relation to the litigation. His retainer was to conduct the litigation in which the plaintiffs were named as defendants. His retainer was different to the retainer of Mr Sutton, who was engaged to act in the conveyancing transaction.
110 Counsel for the defendant submitted that it was clear that the claim was precluded by the immunity from suit recognised by the High Court in Giannarelli v Wraith[11] and D’Orta-Ekenaike v Victoria Legal Aid.[12]
[11] (1998) 165 CLR 43
[12] (2005) 223 CLR 1
111 In D’Orta-Ekenaike, the majority of the High Court held that the immunity of an advocate continues to apply in Australia. It confirmed its earlier decision of Giannarelli in the following passage:[13]
“No sufficient reason is proffered for reconsidering the court’s decision, in Giannarelli, that an advocate is immune from suit whether for negligence or otherwise in the conduct of a case in court. Should the boundary of the operation of the immunity be redrawn?
Again, we consider that no sufficient reason is proffered for doing so. In particular, there is no reason to depart from the test described in Giannarelli as work done in court or ‘work done out of court which leads to a decision affecting the conduct of the case in court’ or, as the latter class of case was described in the explanatory Memorandum for the Bill that became the Practice Act, ‘work intimately connected with’ work in a court. (We do not consider the two statements of the test differ in any significant way.)”
[13] at [85] to [86]
112 D’Orta-Ekenaike makes it clear that the immunity extends to where a legal practitioner, whether acting as an advocate or as a solicitor instructing an advocate, gives advice leading to a decision that affects the conduct of the case in court.[14]
[14] at paragraph [91]
113 In D’Orta-Ekenaike, the joint judgement expressed the public policy basis for immunity in terms of the adverse consequences to the administration of justice that would result from the relitigation of issues that have been judicially determined:
“Rather, the central justification for the advocate's immunity is the principle that controversies, once resolved, are not to be reopened except in a few narrowly defined circumstances. This is a fundamental and pervading tenet of the judicial system, reflecting the role played by the judicial process in the government of society. If an exception to that tenet were to be created by abolishing that immunity, a peculiar type of relitigation would arise. There would be relitigation of a controversy (already determined) as a result of what had happened during, or in preparation for, the hearing that had been designed to quell that controversy. Moreover, it would be relitigation of a skewed and limited kind. No argument was advanced to this Court urging the abolition of judicial or witness immunity. If those immunities remain, it follows that the relitigation could not and would not examine the contribution of judge or witness to the events complained of, only the contribution of the advocate. An exception to the rule against the reopening of controversies would exist, but one of an inefficient and anomalous kind.”[15]
[15] at paragraph [45]
114 It follows that the immunity is not confined to the conduct and management of the case in court but extends to preparatory activities such as the drawing and settling of proceedings, giving advice on evidence and other preliminary decisions affecting the way a cause is to be conducted when it comes to hearing.
115 Further examples of cases falling within the scope of the advocates’ immunity were canvassed by McHugh J in D’Orta-Ekenaike:
“Work that courts have held was intimately connected with the conduct of
a cause includes:
ƒ Failing to raise a matter pertinent to the opposition of a
maintenance application;
ƒ Failing to plead or claim interest in an action for damages; ƒ Issuing a notice to admit and making admissions; ƒ Failing to plead a statutory prohibition on the admissibility of crucial
evidence;ƒ Negligently advising a settlement.”[16]
[16] at paragraph [154]
116 In Keefe v Marks,[17] Gleeson CJ referred to other examples of out-of-court
[17] (1989) 16 NSWLR 713
work that would be intimately connected with the conduct of the ca use:
“… interviewing the plaintiff and any other potential witnesses, giving advice and making decisions about what witnesses to call and not to call, working up any necessary legal arguments, giving consideration to the adequacy of the pleadings and, if appropriate, causing any necessary steps to be undertaken to have the pleadings amended. … .”[18]
[18] at [87]
117 Further, in discussing the meaning of “intimately connected”, in D’Orta- Ekenaike,[19] McHugh J said:
“The issue is whether the relevant connection with the conduct of the litigation exists, not the form of the negligence. An integral part of the advocate’s role is the giving of advice on the basis of which the client will give instructions that direct the course of proceedings. The advice is critical to and often determinative of the client’s decision. There is no relevant distinction between instructions given on negligent advice and the negligent carrying out of instructions if both are intimately connected with the conduct of litigation.”[20]
[19] supra
[20] at [157]
118 The relevant principles for determining whether the advocates’ immunity is applicable were stated by Mason CJ in Giannarelli at pages 559 to 560:
“… the grounds for denying liability for in-court negligence have no application to work done out of court which is unconnected with work done in court: Saif Ali. … Preparation of a case out of court cannot be divorced from presentation in court. The two are inextricably interwoven so that the immunity must extend to work done out of court which leads to a decision affecting the conduct of the case in court.”
119 Counsel for the plaintiff relied upon the House of Lords decision of Saif Ali v Sidney Mitchell & Co.[21] The House of Lords held that the advocates’ immunity from suit extended only to include those matters of pre-trial work which are so intimately connected with the conduct of the case in court that they could be said to be preliminary decisions affecting the manner in which that cause was conducted when it came to a hearing. A failure by a barrister to consider joining a party as a defendant before the limitation period expired did not fall within the immunity. There was no connection between the advice given and the conduct of the case in court.
[21] [1980] AC 198
120 I accept the following evidence given by Mr Chay:
•
That Mr Henderson wanted to defend the proceeding and was not interested in settling the proceeding. This was consistent with the evidence Mr Henderson gave in the current proceeding and his attitude that “I’ve done nothing wrong”.
•
The case was run on Mr Henderson’s instructions and Mr Henderson thought Mr Chay did a good job. Whilst I accept this is irrelevant as to whether Mr Chay acted negligently in the handling of the retainer, it is significant because it confirms that the case was run according to Mr Henderson’s instructions.
•
Mr Chay clearly considered the question of conflict and raised it with Mr Henderson. This was not disputed. This issue is not one that sounds in liability in any event, as it could not, of itself, be causative of any loss.
•
Mr Chay gave evidence that he was instructed to obtain the advice of counsel on the prospects of success on appeal. He did that by engaging Mr Williams of counsel. Counsel’s advice was that the appeal was not hopeless. He advised Mr Henderson and instituted the appeal on Mr Henderson’s instructions. Mr Henderson did not deny any of this in his evidence.
121 I will now consider each of the allegations made by the plaintiffs and whether each one of those allegations relates to work done in court or work done out of court that leads to a decision affecting the conduct of the case in court.
Conflict of interest
122 The plaintiffs submitted Mr Chay breached his duty by failing to advise the plaintiffs of his potential conflict of interest and to advise the plaintiffs to obtain independent advice in relation to the potential conflict. I accept that the issue was a potential conflict. It never became a real issue; that is, it never resolved into a real conflict.
123 It is clear from the evidence that the potential conflict was addressed by Mr Chay with his client and with the solicitors who raised the issue. The “potential conflict” was not pursued by the solicitors who raised the issue.
124 Mr Henderson agreed Mr Chay discussed with him the issue of a conflict of interest that Bumans may have in acting for him in the Magistrates’ Court. He said Mr Chay did not agree that there was a conflict of interest and, accordingly, acted for him.
125 Further, the potential conflict arose in respect to the drafting of the contract of sale and the transfer of lease. The Magistrates’ Court proceeding was determined on misrepresentation. It was not determined on the contract issue. Mr Sutton was not a witness in the Magistrates’ Court proceeding.
126 Counsel for the plaintiffs said Mr Chay should have sought advice from Mr Buman, counsel, an independent legal advisor or the firm’s professional insurer. The advice would have been that the defendant should withdraw from the case as it subsequently did in late May 2008. But for Mr Chay’s negligence the costs of defending the purchasers’ claim would have been avoided.
127 As to that submission, there was no evidence, expert or otherwise, as to what any other legal advisor would have advised. The defendant withdrew from acting for the plaintiffs in 2008 because Mr Henderson indicated that he intended to sue the defendant. That was a different conflict issue.
Notice of Defence
128 The plaintiffs submitted Mr Chay was negligent because he made a decision which caused the plaintiffs to run a defence that was “doomed” to fail. Specifically, Mr Chay breached his duty by filing a Notice of Defence dated 4 August 2006 in the Magistrates’ Court proceeding, pleading that the plaintiffs had not breached any terms of the contract of sale as alleged, when the contract of sale clearly provided for the sale of business with an effective twenty-five-year lease, when the existing actual Lease had only thirteen years to run.
129 The evidence was that Mr Chay acted upon instructions from Mr Henderson, which were to defend the case. Mr Henderson agreed that the matter proceeded in the Magistrates’ Court because he wanted to defend it; he said he had not done anything wrong. The evidence of Mr Sutton, Mr Atkinson and Mr Chay supports this.
130 Further, the Magistrates’ Court proceeding was not decided on the issue of breach of contract, but on the claim of misleading and deceptive conduct under the Fair Trading Act. There was no evidence about the competence of the defence in relation to the claim of misleading and deceptive conduct.
131 Finally, to determine whether the defence was doomed requires an investigation into the manner in which the Magistrates’ Court proceeding was conducted. This is expressly what the decision in D’Orta-Ekenaike says should not be done.
132 Accordingly, I do not accept the submission of the plaintiffs.
The conduct of the purchasers’ solicitor
133 The plaintiffs submitted Mr Chay breached his duty by failing to advise the plaintiffs that the possible negligence of the purchasers’ solicitor would not prevent the purchasers succeeding in their claim because Mr Sutton knew, or should have known, that the purchasers had relied on, and been induced by, the representation in the contract of sale about the length of the lease. Further, Mr Sutton should have advised the plaintiffs of the inconsistency between the contract of sale and the transfer of lease.
134 This allegation involved judgements being made about the ultimate legal issues before they had been determined. This related to how the case was run. I accept that this would fall within the advocates’ immunity.
Purchasers’ rights under the Contract of Sale
135 The plaintiffs further submitted Mr Chay breached his duty by failing to advise the plaintiffs that if the purchasers had noticed prior to settlement that the variation was not included in the transfer of lease and the landlord refused to grant the extra options, the purchasers were entitled to settle the contract and sue for damages. They were not restricted to a right to withdraw from the contract.
136 This allegation had nothing to do with the case that was conducted in the Magistrates’ Court, and therefore falls outside the scope of Mr Chay’s retainer.
Evidence of Mr Horwood
137 The plaintiffs submitted Mr Chay breached his duty by failing to:
•
ascertain before the Magistrates’ Court hearing that Mr Horwood would give evidence that the landlord had never agreed, even verbally, to grant the two further options.
•
contact Mr Horwood until only a few days before the Magistrates’ Court hearing.
•
cross-examine Mr Horwood when he was called to give evidence on behalf of the purchasers, by putting to him Mr Henderson’s version of the verbal agreement to grant the two further options.
138 The evidence was that Mr Horwood had sent a letter to the purchasers dated 16 October 2005 informing the purchasers that he had not agreed to two extra options of six years each. The letter was discovered and made known to the plaintiffs prior to the Magistrates’ Court hearing. Further, Mr Chay’s evidence was that he contacted Mr Horwood prior to the hearing in the Magistrates’ Court and advised Mr Henderson that Mr Horwood denied there was an agreement. I accept Mr Chay’s evidence on this point.
139 I consider that the evidence does not support the submission that Mr Chay was unaware of the evidence Mr Horwood would give. As such, Mr Chay’s failure to contact Mr Horwood until a few days before the hearing had no effect on the conduct of the proceeding as the substance of Mr Horwood’s evidence was already known to him.
140 In addition, this conduct extends to preparatory activities (the obtaining of evidence) and affects the way the case was to be conducted when it went to court. It is out-of-court work that was intimately connected with the cause.[22]
[22] Keefe v Marks (supra)
141 Finally, decisions about what questions are asked, when they are asked and how they are asked are solely within the discretion of counsel or, in this case, the advocate. It falls within the advocates’ immunity.
Expert evidence
142 The plaintiffs submitted Mr Chay breached his duty by failing to advise the plaintiffs that the purchasers would prove by expert evidence that the difference in value between the business with a lease with twenty-five years to run and the business with a lease of thirteen years to run was in excess of $100,000 in the absence of contrary evidence for the plaintiffs.
143 I accept Mr Chay’s evidence that he discussed this with Mr Henderson and informed Mr Henderson that Dickens had obtained a report similar to that obtained by the purchasers. Mr Henderson was determined to run the case.
144 This would fall within the ‘advocates’ immunity’.
Prospects of success of the appeal
145 The plaintiffs submitted Mr Chay breached his duty by advising the plaintiffs they had a prospect of success on the appeal to the Supreme Court on a point of law where the Magistrate had found, as a fact, that Mr Henderson had made the alleged misrepresentation to the purchasers and the purchasers had relied upon it.
146 Mr Chay’s evidence was that he sought advice from counsel, Mr Darryl Williams, about the prospects of success on an appeal. The advice was that the prospects were not hopeless and Mr Henderson’s instructions were that if the advice that Mr Chay received was that it was not hopeless, then he wanted to pursue the appeal. Further, the evidence is that after Mr Chay withdrew from acting for the plaintiff other solicitors were engaged, and those solicitors pursued the appeal. Accordingly, that submission is not supported by the evidence.
147 It is clear that each of the matters complained of in relation to alleged negligent conduct was conduct either running the case in court or conduct that led to a decision about how the case should be conducted in court and, as such, intimately connected with the conduct of the case in court. It follows that the claims made by the applicant in relation to negligence are not sustainable.
Additional matters
148 A number of matters were raised by counsel for the plaintiffs in relation to Mr Chay’s conduct that were not alleged in the pleadings:
(a) Mr Chay did not take a proof of evidence of Mr Henderson. Mr Chay agreed he did not take a proof of evidence of Mr Henderson. He said he wanted his evidence to be natural. Such a decision would fall within the advocates’ immunity. In any event, it was obvious from the letters written and the documents in the Court Book that he clearly had obtained detailed instructions from Mr Henderson.
(b) The joinder of Dickens. Mr Chay said in evidence that Dickens was not joined by the plaintiffs (the defendants in the Magistrates’ Court proceeding). The submission was that Mr Chay was negligent in failing to advise the plaintiffs that Dickens should be released from the proceeding on the basis of Ms Leslie’s evidence and that the purchasers’ solicitor should be informed that the plaintiffs would indemnify Dickens with regard to any liability. There was no evidence from the plaintiffs that if provided with that advice they would have indemnified Dickens. Given the file notes of Mr Chay I think that highly unlikely. In any event a forensic decision was taken by Mr Chay and that would fall within the advocates’ immunity.
(c) Mr Chay conceded he had little experience in conveyancing transactions. Most litigators have little experience in the subject matter of the proceeding in which they act. That cannot affect the running of the litigation.
(d)
Mr Chay was said to be negligent because he defended the proceeding on the basis that there was a break in the chain of causation (because it was the purchasers’ responsibility).
This falls within the advocates’ immunity.
Damages
149 I conclude that in failing to identify the inconsistency between the contract of sale and the transfer of lease, Mr Suttton breached his duty to the plaintiffs.
150 I conclude, on the balance of probabilities, that the plaintiffs, the purchasers and the landlord would have been able to re-negotiate the sale of the business with two extra options and an increase in rent, with the result that the purchase price for the business would have been $210,000.
151 I conclude that given the number of parties and the contingencies, it is appropriate that the damages be reduced by 25 per cent.
152 The plaintiffs claim the difference between the $100,000 damages that they had to pay in the Magistrates’ Court, less the reduction on the sale price of $210,000, being $21,000, arriving at $79,000.
153 The plaintiffs claim interest of $17,112.30 paid to the purchasers on the judgment. That was ordered on the misrepresentation claim in the Magistrates’ Court, which was an entirely different claim to the claim in this proceeding. I have decided that the plaintiffs are not entitled to interest paid in the Magistrates’ Court proceeding.
154 The plaintiffs claim that “but for” the defendant’s negligence the plaintiffs would not have been involved in the Magistrates’ Court litigation and the appeal. Accordingly, they would not have suffered the losses being the costs of litigation. Those costs totalled $91,991.35. I would not allow the costs of the appeal. Doing the best I can on the figures provided, I assess the costs of the appeal at $26,991.35. Accordingly, I accept that the costs of the Magistrates’ Court trial were about $65,000.
155 The plaintiffs claimed interest on the amounts they paid in the Magistrates; Court until the end of trial. I do not propose to allow any of that claim.
156 Accordingly, I assess damages at $144,000.00, which I will reduce by 25 per cent and will award damages in the sum of $108,000.00 (One Hundred and Eight Thousand Dollars) to the plaintiff.
157 I will hear the parties about interest and costs.
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