Mackintosh v Baldock
[2000] TASSC 6
•29 February 2000
[2000] TASSC 6
CITATION: Mackintosh v Baldock [2000] TASSC 6
PARTIES: MACKINTOSH, Patricia trading as
MACKINTOSH & ASSOCIATES
MACKINTOSH, James trading as
MACKINTOSH & ASSOCIATES
v
BALDOCK, Gregory Lionel
BALDOCK, Tamara Annabelle
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 76/1999
DELIVERED ON: 29 February 2000
DELIVERED AT: Hobart
HEARING DATES: 3 November 1999
JUDGMENT OF: Wright, Crawford and Slicer JJ
CATCHWORDS:
REPRESENTATION:
Counsel:
Appellants: S P Estcourt QC
Respondents: K E Read
Solicitors:
Appellants: Page Seager
Respondents: Phillips Taglieri
Judgment Number: [2000] TASSC 6
Number of Paragraphs: 19
Serial No 6/2000
File No FCA 76/1999
PATRICIA MACKINTOSH trading as MACKINTOSH & ASSOCIATES and
JAMES MACKINTOSH trading as MACKINTOSH & ASSOCIATES
v GREGORY LIONEL BALDOCK and
TAMARA ANNABELLE BALDOCK
REASONS FOR JUDGMENT FULL COURT
WRIGHT J
CRAWFORD J
SLICER J
29 February 2000
Order of the Court
Appeal dismissed.
Serial No 6/2000
File No FCA 76/1999
PATRICIA MACKINTOSH trading as MACKINTOSH & ASSOCIATES and
JAMES MACKINTOSH trading as MACKINTOSH & ASSOCIATES
v GREGORY LIONEL BALDOCK and
TAMARA ANNABELLE BALDOCK
REASONS FOR JUDGMENT FULL COURT
WRIGHT J
29 February 2000
For the reasons prepared by Slicer J, which I have had the advantage of reading, I am of the opinion that this appeal fails and should be dismissed.
File No FCA 76/1999
PATRICIA MACKINTOSH trading as MACKINTOSH & ASSOCIATES and
JAMES MACKINTOSH trading as MACKINTOSH & ASSOCIATES
v GREGORY LIONEL BALDOCK and
TAMARA ANNABELLE BALDOCK
REASONS FOR JUDGMENT FULL COURT
CRAWFORD J
29 February 2000
I also agree that the appeal should be dismissed for the reasons stated by Slicer J.
File No FCA 76/1999
PATRICIA MACKINTOSH trading as MACKINTOSH & ASSOCIATES and
JAMES MACKINTOSH trading as MACKINTOSH & ASSOCIATES
v GREGORY LIONEL BALDOCK and
TAMARA ANNABELLE BALDOCK
REASONS FOR JUDGMENT FULL COURT
SLICER J
29 February 2000
The appellants were found to be in breach of their duty of care to the respondents by failing to properly advise as to certain taxation implications to the sale of a capital asset. Following the sale of that asset, an assessment of capital gains was made in the sum of $28,569 which was paid to the Deputy Commissioner of Taxation. The respondents borrowed that sum and had, shortly before the date of trial, paid a further sum of $15,521 as interest, with an on going daily rate of interest of $5.41.
The learned primary judge entered judgment for the respondents in those amounts following his finding of negligence. In doing so, he made reference to the principles governing the assessment of damages in both contract and tort in accordance with the principles stated in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, although in his reasons he made no specific reference to contract in the basis of assessment. Given the principles relevant to damages as stated by the High Court in Astley v Austrust Ltd (1998) 73 ALJR 402, nothing turns on any omission. The learned primary judge accepted the evidence of the respondents that had it not been for the failure to advise that capital gains tax would be payable, they would not have proceeded with the sale. They claimed that they would have continued with their business and maintained their asset, those claims being accepted, with a minor reservation, by the learned primary judge.
The appellants claim error on three bases, namely, that:
(1)There was no evidence to show the position in which the respondents would have been had correct advice been provided.
(2)There was error in the finding that the respondents would not have sold the asset but for the negligent advice.
(3)No basis existed for an award of interest for the loan taken out to pay the capital gains tax.
The appellants have pleaded error in fact and law. The learned primary judge accepted the evidence of the respondents that they would not have sold the asset had they known that a sum of $29,000 was to be deducted from the amount they were to receive. He stated at par13:
"Mr Estcourt QC, for the defendant, cross-examined Mr Baldock in an attempt to show that a reason for the sale was that the business was unprofitable and the outlook for its future was bleak. However, the attempt was unsuccessful, for not only did Mr Baldock deny this, but the evidence of Mr Gillespie made it clear that after he purchased the truck, there was sufficient work for it to be used profitably, and 12 months later his work increased to such an extent that there was enough for two log trucks."
and specifically found at 31:
"Upon careful consideration of the evidence, I have come to the conclusion that the plaintiffs have established that that it is more probable than not that their version of events is correct. That conclusion is reached for the following reasons not set out in order of significance.
…They decided to sell, which, given the finding that has been made, they would not have done had they been uncertain about the incidence of capital gains tax."
He was entitled to make those findings, clearly permitted by the evidence. The relevant ground of appeal claims:
"2That the Learned Trial Judge erred in fact and in law in finding or inferring that the Respondents would not have sold their truck but for the advice of the Appellants that that transaction would not be subject to Capital Gains Tax."
The real complaint raised by ground 2 is, as learned counsel stated in argument during the hearing of the appeal, that the findings themselves were insufficient. The learned primary judge stated, at par34:
"Insofar as the claim is based in tort, the evidence does not support a submission made on behalf of the defendant that the plaintiffs are better off financially, notwithstanding them [sic] acting on erroneous advice with respect to the payment of capital gains tax. The evidence of the earnings of the partnership during the period it operated the truck, together with the evidence of Mr Gillespie, show that the partnership was a profitable business. Working as an employed driver, an occupation that Mr Baldock pursued before he went into partnership with his wife and to which he returned after the truck was sold, produced less income than did the partnership business."
Learned counsel stated that the finding was wrong because it did not go far enough. The error claimed on behalf of the appellant was that in order to make an assessment of damages, the learned primary judge was required to explore and determine what would have been the financial position of the respondents had they stayed in business. Then, and only then, it was submitted, could the court determine the means of implementing the appropriate remedy of placing them in the position in which they would have been had there been no breach of duty. Ground 2, as an appeal based on factual error, has no validity and must fail. Insofar as it impacts on the issues raised by ground 1, it will be further considered in relation to the wider issue.
Ground 1 of the notice of appeal claims:
"That the Learned Trial Judge erred in fact and in law in holding that the Appellants' breach of contract and/or negligence was causative of any loss or damage on the part of the Respondents."
The contention is that this was a case of "loss of chance" in that the respondents, by selling the asset, lost the opportunity to continue running a business. In order to succeed in a claim for damages, they needed to adduce evidence as to their prospects in business, likelihood of continued success, estimated financial returns, and the like. Since they had not established the likelihood or extent of future profits from the continuation of the business, no foundation was provided for an award of damages. This argument ought not succeed. The relevant pleadings, as set out in the statement of claim, state:
"4 In the circumstances it was a term of the retainer and it was the duty of the Defendants in performance of the retainer to exercise all reasonable care and competence as accountants and tax agents in providing the advice sought and to ensure that the advice given would be correct and understood by the Plaintiffs.
5 In purported performance of the retainer the Defendants advised the Plaintiffs ('the advice given') that if they sold the equipment they would not incur any liability to tax on any capital gain.
6 The advice given was incorrect.
7 The advice given was given in breach of the term and in breach of the duty of care alleged in paragraph four hereof.
8 The advice given was provided in the expectation that the Plaintiffs would rely on the advice.
9 In reliance on the advice given the Plaintiffs entered into a contact on or about 30th January, 1991 for the sale of the equipment and sold the equipment ('the sale').
10 As a direct consequence of the sale the Plaintiffs incurred taxation liability ('the initial taxation liability')."
The claim of the respondents was not one based on future expectation or loss of opportunity. It was based on the sale of an asset, the net return for which was considerably less than had been anticipated. They sold (and thereby acted) to their detriment. They were required to establish causation and succeeded in doing so with the finding that they would not have sold but for the advice given. The loss was a consequence of reliance on negligent advice. What benefit or detriment they might have obtained or incurred had they stayed in business, formed no part of their claim, either because of the principle of remoteness or tactical choice. Having established entitlement based on reliance, it was for the appellant to establish that some other course would have proved more or less advantageous (Chappel v Hart (1998) 72 ALJR 1334). It was not incumbent on the respondents to frame alternative ways by which the measure of damages could be assessed (The Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 per Mason CJ and Dawson J at 85, 91). The respondents suffered loss on the sale of an asset, not on a failure to remain in business. They were required to prove that they could and would (might) have acted differently on receipt of different advice (Gates (supra), Sellars v Adelaide Petroleum NL (1992 - 1994) 179 CLR 332).
As Gaudron J stated in Chappel v Hart (supra), at 250:
"Where there is a duty to inform it is, of course, necessary for a plaintiff to give evidence as to what would or would not have happened if the information in question had been provided. If that evidence is to the effect that the injured person would have acted to avoid or minimise the risk of injury, it is to apply sophistry rather than common sense to say that, although the risk of physical injury which came about called the duty of care into existence, breach of that duty did not cause or contribute to that injury, but simply resulted in the loss of an opportunity to pursue a different course of action.".
A similar approach in relation to an award of "reliance" damages was taken by Gummow and Kirby JJ, an approach consistent with that taken in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506. The distinction between reliance and expectation damages was explained by Brennan J in The Commonwealth v Amann Aviation Pty Limited (supra) when he stated, at 104 - 105:
"Where a contract has been rescinded for breach, the amount which a plaintiff has reasonably expended in reliance on the defendant's promise and which is wasted by reason of the defendant's breach of his promise is a proper subject of damages for breach of contract: McRae v Commonwealth Disposals Commission, at pp 412, 414. Damages assessed for wasted expenditure incurred in reliance on the defendant's promise may be described as reliance damages to distinguish them from damages assessed for loss of the benefits which the plaintiff expected from performance of the contract (expectation damages). A plaintiff who seeks to recover reliance damages must ordinarily prove that the net value of the benefits to which he would have been entitled if the contract had been performed ($B - $y) would have exceeded the wasted expenditure incurred in reliance on the defendant's promise ($x) and, to the extent that he fails to do so, his claim will fail. To discharge the onus of proof, however, the plaintiff may be able to raise and rely on an inference that a party would not incur expenditure in reliance on the other party's promise without a reasonable expectation that, on performance of the contract, the expenditure would be recouped. That is an inference of varying strength according to the circumstances. Sometimes, the inference would be of sufficient strength to enable the plaintiff to discharge the onus; sometimes, the inference would be too weak."
and at 107:
"… between the method of assessment of expectation damages and the method of assessment of reliance damages is the reversal in the case of reliance damages of the onus of proof of the net value of the plaintiff's contractual benefits. There can be no duplication of reliance damages and expectation damages. The compensable losses in reliance damages do not include possible lost profits but both cover expenditure reasonably incurred in preparing to perform and in performing the contract within the limits prescribed by Robinson v Harman."
Identical reasoning and conclusions were stated and reached by Deane J at 126 - 128 and Toohey J at 135.
The respondents were entitled to be compensated for the loss incurred by the imposition of a tax on the sale of an asset since the return on sale was less than anticipated. They were entitled to have their damages in the same manner as the successful appellants in Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] (1980 - 1981) 150 CLR 225.
Grounds 1 and 2 of the notice of appeal fail.
Interest
Grounds 3 and 4 of the notice of appeal assert:
"3 That the Learned Trial Judge erred in fact and in law in failing to take into account the profit which was received by the Respondents upon the sale of the truck when determining what, if any, loss and/or damage was suffered by the Respondents from the Appellants' breach of contract and/or negligence.
4 That the Learned Trial Judge erred in fact and in law in finding that the Respondents were entitled to the amounts of $15,521.46 to the 23rd April 1999 and thereafter $5.41 per day until the date of Judgment as damages calculated as interest on a loan taken out to pay Capital Gains Tax."
The appellants' contention is similar to that made in support of ground 1. The payment of interest was not a direct consequence of the negligent advice. The respondents could have paid the money from their own resources and made a claim based on the loss of use of that money. The respondents received a profit from the sale of the asset, although the evidence disclosed an obligation to repay some $86,000 to a secured lender. On one set of figures made available to the learned primary judge, the respondents were to receive approximately $40,000. In addition, they had left some money, as an unsecured debt, as vendor finance. The appellants' contention that it was incumbent on the respondents to show what had happened to the remaining net proceeds does not advantage them. Had the respondents been able to have recourse to their own resources, they would have remained entitled to claim compensation in accordance with the principles stated in Hungerfords v Walker (1990) 171 CLR 125 for the loss of use of that money. Accepting that the money in fact borrowed by the respondents attracted a higher rate of interest than equivalent money invested, they were still entitled to borrow. Consistent with the statements of principle in The Commonwealth v Amann Aviation Pty Limited (supra), it was for the appellants to show that a viable alternative could have been followed. No such attempt was made. It was an agreed fact that the respondents had borrowed the money and the borrowing was a loss which flowed directly and naturally from the breach of duty. As Mason CJ and Wilson J said in Hungerfords (supra) at 143:
"… the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss. In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant's breach of contract or negligence. Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of the borrowing cost, ie, interest payable on borrowed money or interest foregone because an existing investment is realized or reduced."
and in relation to interest, they concluded, at 145 - 146:
"The cost of borrowing money to replace money paid away or withheld, in consequence of the defendant's breach of contract or negligence, is directly related to the wrong and is not too remote in the sense in which the common law regarded the loss attributable to late payment of damages as being too remote."
The award of interest was in accordance with these principles.
Grounds 4 and 5 of the notice of appeal are not made out.
In my opinion, the appeal ought be dismissed.
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