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Kossaifi v ACN 111 804 383 Pty Ltd

Kossaifi v ACN 111 804 383 Pty Ltd

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Supreme Court

New South Wales

Medium Neutral Citation: Kossaifi v ACN 111 804 383 Pty Ltd [2020] NSWSC 853
Hearing dates: 24–28 February 2020, 2–3 March 2020
Date of orders: 03 July 2020
Decision date: 03 July 2020
Jurisdiction: Common Law
Before: Cavanagh J
Decision:
(1) Judgment for the defendants.
(2) The plaintiffs to pay the defendants’ costs.
(3) Grant liberty to the parties to apply on three days’ notice should the parties seek any alternative costs order.

Catchwords:
NEGLIGENCE — professional negligence — claim against solicitors by former clients in tort and contract — relationship breakdown between company directors and shareholders — advice as to appropriate process to divide company assets between shareholders — external administration — scope of duty of care owed by solicitor to client in the circumstances — Civil Liability Act 2002 (NSW) s 5O not pleaded in defence — liability assessed under Civil Liability Act s 5B
NEGLIGENCE — causation — loss of opportunity to take alternative course resulting in different financial outcome — whether defendant's alleged breaches of duty caused plaintiff's loss — extent of plaintiff's reliance on defendant for advice — whether plaintiff would have accepted and acted upon further advice from defendant contrary to course adopted by plaintiff and other shareholders

Legislation Cited:
Civil Liability Act2002 (NSW), Pts 1A, 4, ss 5B, 5D, 5E, 5O
Corporations Act 2001 (Cth) Pts 5.3A, 5.5, ss 232, 233, 234, 435A, 435C, 436A, 436E, 437A, 438A, 439A, 443D, 444B, 446A, 447A, 449E, 461, 462, 463E, 513B, Sch 2
Professional Standards Act 1994 (NSW)

Cases Cited:
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54
Correa v Whittingham (2013) 278 FLR 310; [2013] NSWCA 263
David v David [2009] NSWCA 8
Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 156 FLR 453; [2000] NSWSC 99
Fexuto Pty Limited v Bosnjak Holdings Pty Limited & Ors [2001] NSWCA 97; (2001) 37 ACSR 672
Fink v Fink (1946) 74 CLR 127; [1946] HCA 54
GEC Alsthom Australia Ltd v City of Sunshine (Federal Court of Australia, Ryan J, 20 February 1996, unrep)
Groom v Crocker [1939] 1 K.B. 194
Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145
Hawkins v Clayton (1988) 164 CLR 539; [1988] HCA 15
In the matter of Antqip Hire Pty Limited (subject to deed of company arrangement) (in liquidation) [2020] NSWSC 487
In the matter of Joe & Joe Developments Pty Ltd (subject to a Deed of Company Arrangement) [2014] NSWSC 1444
In the matter of Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) [2015] NSWSC 244
In the matter of Warwick Keneally as administrator of Australian Blue Mountain International Cultural & Tourist Group Pty Ltd (admin apptd) [2015] NSWSC 937
Kazar v Duus (1998) 88 FCR 218; [1998] FCA 1378
Leary v Federal Commissioner of Taxation (1980) 47 FLR 414; [1980] FCA 112
Midland Bank Trust Co Ltd v Hett, Stubbs…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NSWSC 853
Decision Date: 03 July 2020

CaseChat Overview and Summary

In the matter of Kossaifi v ACN 111 804 383 Pty Ltd, the plaintiff, Mr Kossaifi, brought a claim against the defendants, the company and its solicitors, for professional negligence in tort and contract. The dispute arose from the solicitors' advice to the directors of the company during a period of significant relationship breakdown between the directors and shareholders. The plaintiffs sought advice on the appropriate process to divide the company's assets between the shareholders. The matter culminated in the company entering external administration, leading the plaintiffs to assert that the solicitors' advice was negligent and caused them financial loss.

The primary legal issues before the court were the scope of the duty of care owed by the solicitors to the plaintiffs in the given circumstances and whether the plaintiffs' losses were a direct result of the solicitors' alleged breaches of duty. The court had to determine if the plaintiffs would have accepted and acted upon any further advice from the solicitors contrary to the course they had adopted with other shareholders. The defendants did not plead section 5O of the Civil Liability Act 2002 (NSW) in their defence, thus the court assessed the liability under section 5B of the Act.

The court found that the solicitors owed a duty of care to the plaintiffs in providing advice on the division of company assets during the period of relationship breakdown. The court considered the extent to which the plaintiffs relied on the solicitors for advice and whether the plaintiffs would have acted differently had they received further advice from the solicitors. Ultimately, the court held that the plaintiffs' losses were not a direct result of the solicitors' alleged breaches of duty. The court concluded that the plaintiffs' decision to proceed with the course they did was not influenced by any potential further advice from the solicitors. The plaintiffs' claim was dismissed.

The court did not make any further orders beyond dismissing the plaintiffs' claim against the defendants.

Orders