Mediterranean Olives Financial Pty Ltd v Gita Lederberger
[2011] VSC 301
•1 July 2011
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST A
No. 1385 of 2010
| MEDITERRANEAN OLIVES FINANCIAL PTY LTD and others (according to schedule attached) | Plaintiffs |
| v | |
| GITA LEDERBERGER and SAMUEL LEDERBERGER | Defendants |
| STERLING & SHEINK (a firm) | Third Party |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 - 7 June, 14 June 2011 | |
DATE OF JUDGMENT: | 1 July 2011 | |
CASE MAY BE CITED AS: | Mediterranean Olives Financial Pty Ltd & Ors v Gita Lederberger & Ors | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 301 | |
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CONTRACT – Parties – Identity – Objective intention – Liability – Authority to act on behalf of partnership.
THIRD PARTY CLAIM – Negligence – Solicitor’s duty to client – Whether failure to advise – Damages – Causation.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Peters S.C. with Mr P Fary | Herbert Geer |
| For the First Defendant | Mr M Ravech | Spigler & Schwarcz |
| For the Second Defendant | Mr J Korman | Dov Silberman Lawyers |
| For the Third Party | Ms R Sofroniou | Minter Ellison |
HIS HONOUR:
The key issue in this proceeding is the identity of the party with whom the plaintiffs contracted in what may conveniently be described as tax effective products. The plaintiffs contended that they entered into contracts with the members of a partnership (“the partnership”) constituted by Mrs Gita Lederberger (as trustee of the deceased estate of her late husband) and Lederberger Investments Pty Ltd (“Lederberger Investments”) through their agents. The plaintiffs’ alternative position is that Mr Samuel Lederberger (Mrs Lederberger’s son) is personally liable under the contracts with the plaintiffs. The position of the defendants is that the contracts with the plaintiffs were entered into by plaintiffs with Loaders Traders Pty Ltd (“Loaders Traders”). Loaders Traders and Lederberger Investments have both entered into deeds of company arrangements and claims against them cannot be, and were not, pursued in these proceedings. Mrs Lederberger joined her former solicitors, Sterling & Sheink, as third parties to the proceeding maintaining that any liability to which she may be exposed is attributable to their negligence. Sterling & Sheink defend the third party action by maintaining, essentially, that no loss has been incurred by Mrs Lederberger that was caused by any negligence for which they may be responsible.
The defendants’ contention that contracts with the plaintiffs were not entered into on behalf of the partners was inconsistent with their conduct after the contracts were entered into and was inconsistent with the purpose for which the contracts were made. Mr Samuel Lederberger gave evidence of meeting with Mr Tom May (on behalf of the plaintiffs) in May or early June 2006 to enter into a Blue Gum scheme to secure substantial tax deductions to offset against significant profits expected in that year. The taxpayers who were expected to have significant profits in the 2006 year were the members of the partnership. Mr Samuel Lederberger’s own evidence in chief on this point was as follows:
MR KORMAN: Mr Lederberger, I will take you to the West Australian Blue Gum transaction. Can you tell the court how it came about that you - how those transactions came about?
MR LEDERBERGER: I expected to have a significant profit in 2006 and I asked my accountant about if there is any way I can go to have a tax effective scheme, enter into a tax effective scheme and he proposed WA Blue Gum.
MR KORMAN: Then what happened?
MR LEDERBERGER: I met with Tom May and the accountant at his office, the accountant's office, and he went through the scheme, the olives and the blue gum, and then I decided to enter into the blue gum scheme.
MR KORMAN: Roughly what would have been the date, roughly, when this happened?
MR LEDERBERGER: It was late May or early June 2006.
MR KORMAN: This meeting that you describe, where did that take place?
MR LEDERBERGER: In the accountant's office.
MR KORMAN: Did you fill in the paperwork at that stage?
MR LEDERBERGER: I don't recall.
MR KORMAN: I would like to show you the application form for blue gum. The [exhibited] number is P3. On that application form there is handwriting and signatures. Looking through that form, all the handwriting and signatures, do you recognize them?
MR LEDERBERGER: That's my handwriting.
MR KORMAN: And the signatures?
MR LEDERBERGER: And my signature.
It is clear from this evidence that what Mr Samuel Lederberger sought to achieve through the Blue Gum scheme was to secure substantial tax deductions for the benefit of the taxpayers he expected would have a significant profit in 2006. The taxpayers expected to have significant profits, and those which did have significant profits in 2006 were the partners trading as Loaders Manufacturers and Traders, namely the first defendant and Lederberger Investments. Mr Lederberger had effective control of the partnership business and it was his intention to secure for that taxable entity the tax deductions which would be available, and which were in fact claimed by the taxpayers who had been expected to make taxable profits in the 2006 year of income. Those taxpayers in both the 2006 and the 2007 years of income were the partners constituting the estate of his late father (of which Mrs Lederberger was the trustee) and Lederberger Investments. They were the partners identified in the tax return of the partnership described as Loaders Manufacturers and Traders. It was not Loaders Traders.
In the 2006 year the partners claimed, and received the benefit of, a reduction of $503,500 to their taxable income by claiming participation in the Blue Gum scheme with the third and fourth plaintiffs. In the 2007 year the same partners claimed, and received the benefit of, a reduction of $96,451.16 to their taxable income for their claimed participation in the Blue Gum scheme with the third and fourth plaintiffs and a reduction of $350,400 to their taxable income by their claimed participation in the Mediterranean Olives scheme with the first and second plaintiffs. In each year Mr Samuel Lederberger signed declarations in the partnership tax returns that what was contained in them was true and correct. No amendment has ever been made or sought to the tax returns. In the 2007 year the partnership returned a net taxable loss of $410,316 of which the estate claimed $136,772. In all, in the 2007 year, a total of $446,851 was claimed as partnership expenses attributable to the participation which the partners claimed in the two projects upon which the plaintiffs sue in this proceeding. In the 2006 year Mrs Lederberger signed a trust tax return for the estate of which she was trustee declaring that the information in the tax return for the deceased’s estate was true and correct. Each of these returns were prepared by their accountant, Mr Lebovits, who declared the returns to have been prepared in accordance with information supplied by the taxpayers. Mr Lebovits was not called by the defendants to give evidence to contradict the accuracy of the tax returns or to support the defendants’ contentions in this proceeding which conflict with the details of those returns. Neither Mr Samuel Lederberger nor Mrs Lederberger sought to join Mr Lebovits as a party to this proceeding to claim that any loss suffered by them was caused by any error by him, by any excess of authority by him or by any failure by him in any duty he owed to either of them.
In contrast to these facts, the defendants maintained in these proceedings that the contracts with the plaintiffs were made, not by the partners of the partnership, but rather, with the entity registered “in relation to” the Victorian business name “Loaders Manufacturers & Traders” numbered 0359052S in the Business Name Register maintained by Consumer Affairs Victoria. That business name was registered “in relation to” Loaders Traders for the period 22 February 2005 to 8 August 2008. The certificate of registration does not disclose any other person behind the registered business name for that period and the defendants’ contention was that the contracts with the plaintiffs were therefore to be construed as having been entered into with Loaders Traders and not with the partners of the partnership who were trading by that name.
The test to answer the question “who are the parties” to a contract “depends upon looking at the particular contract and ascertaining, as a matter of interpretation, who are the parties actually named as parties to the contract; or it may be a matter of ascertaining the objective intention from all the circumstances”.[1] The relevant party actually named in this case was described as “Loaders Manufacturers & Traders 0359052S”. The number “0359052S” was the Victorian business name registered “in relation to” Loaders Traders but that fact alone is not determinative. In Pethybridge v Stedikas Holdings Pty Ltd[2] the New South Wales Court of Appeal held that the person who had registered a business name by which a contracting party was identified was not the contracting person where another was in fact carrying on business under that name.[3] Furthermore, in Re ABC Plastik Pty Ltd[4] Needham J held that registration of a business name was prima facie evidence of ownership but that it was open to the parties to prove otherwise.[5]
[1]NC Seddon and MP Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Australian ed, 2008) 277 [7.2] (citations omitted).
[2][2007] NSWCA 154.
[3]Ibid [54]–[57] (Campbell JA with Beazley and Basten JJA agreeing).
[4](1975) 1 ACLR 446.
[5]See also Press v Mathers [1927] VLR 326, 333 (Dixon JA); and Re Johnson; Ex parte Greendale Engineering and Cables Ltd (1967) 11 FLR 335, 343 (Gibbs J); Aikman v Brown (1973) 1 ACTR 121, 123 (Fox J).
The principles relevant to the proper construction of contracts are well established and depend upon determining the objective intention of the parties.[6] In Codelfa Construction Pty Ltd v State Rail Authority (NSW)[7] Mason J explained the basis upon which evidence of surrounding circumstances was relevant to the construction of a written agreement and said:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.[8]
His Honour made clear in this passage that statements and actions of parties reflecting their “actual” intentions may not be used to displace their written agreement. By “actual” intentions his Honour no doubt meant “subjective” intention, because it may usually be inferred that the terms of a contract reflect the actual intention of the parties.[9]
[6]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 177-9 (Gleeson CJ, Gummow, Hayne, Callinan, and Heydon JJ); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461-2 (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
[7](1982) 149 CLR 337.
[8]Ibid 352.
[9]L Schuler AG v Wickman Machine Tools Sales Ltd [1974] AC 235, 263 (Lord Simon); Bahr v Nicolay (No 2) (1988) 164 CLR 604, 616-7, 651 (Brennan J).
The task of construction of contracts is to give effect to what the parties are objectively to be taken to have intended by their agreement. The aim or object of the contract will necessarily be a matter that a reasonable person would take into account in deciding what the parties intended by their contract. In McCann v Switzerland Insurance[10] Gleeson CJ said:
[10](2000) 203 CLR 579.
Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses and the objects which it is intended to secure.[11]
[11]Ibid 589.
In Ryledar Pty Ltd v Euphoric Pty Ltd[12] Campbell JA said:
[12][2007] NSWCA 65.
For the purpose of deciding whether a contract has been entered, or what construction it bears, the common intention that the court seeks to ascertain is what is sometimes called the "objective intention" of the parties. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract.
There is also authoritative recognition that a factor to be taken into account in deciding whether a contract has been entered and if so what are its terms is "the purpose and object of the transaction". In Pacific Carriers Ltd v BNP Paribas the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ recognised the appropriateness of taking into account the purpose and object of the transaction, and continued:
“In Codelfa Constructions Pty Ltd v State Rail Authority of NSW Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:
“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”
But the purpose and object of the transaction is itself ascertained objectively - it is ascertained by considering what a reasonable observer, in the situation of the parties, would conclude was the purpose and object of the transaction. In Prenn v Simmonds Lord Wilberforce noted that Lord Blackburn's judgment in River Wear Commissioners v Adamson had said that the task involved in construction required one to:
“... inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view."
Lord Wilberforce also said:
“the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact.”,
and,
“... evidence of negotiations, or of the parties' intentions ... ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the "genesis" and objectively the "aim" of the transaction.” (Emphasis added by Campbell JA).[13]
In this case the fundamental purpose to be achieved by the contracts with the plaintiffs was participation in business ventures that would secure tax deductions to those taxpayers expected to have profits in the 2006 and 2007 income years. On no view of the facts was that going to be Loaders Traders; on any view of the facts that was going to be the partners of the partnership who were carrying on business by reference to the business name registered by Loaders Traders but held by it as bare trustee for the partners.
[13]Ibid [262]–[265] (emphasis in original) (citations omitted).
The name of the partnership which carried on business in 2006, 2007 and 2008 by the partners was described in the partnership tax returns for each of those years as “Loaders Manufacturers & Traders”. The business conducted by the partnership had been established by the late Mr Hirsch Lederberger in the 1950s. The late Mr Hirsch Lederberger was Mr Samuel Lederberger’s father and Mrs Lederberger’s husband. The provision of his Will had left a third of the business to his son Israel Lederberger (known as Bob Lederberger), a third to his son Samuel Lederberger and a third was left on trust in the estate with the income of that share to go to Mrs Lederberger. The remainder of that share was to be divided between his two sons upon Mrs Lederberger’s death.
On 1 October 2003 the estate and Lederberger Investments (that is, the two partners as disclosed in the tax returns) were registered with the Australian Business Register in respect of a partnership using the name “Loaders Manufacturers & Traders” and were given the Australian Business Number (“ABN”) 15 921 975 885. On 28 November 2003 Loaders Traders made a declaration recording that the partnership between the estate and Lederberger Investments carried on business under the name or style “Loaders Manufacturers & Traders” which it had registered. The declaration also recorded that Loaders Traders acted as a bare trustee for the partnership and did so only in that all of the assets of the partnership were held by the trustee in trust for the partners absolutely in the proportions set out in a schedule. The declaration otherwise recorded that all of the income and the monies derived by the partnership were beneficially the property of the partners and the trustee was authorised to guarantee or indemnify any person and to mortgage or charge the partnership property.
Mr Samuel Lederberger has been in business for around 35 years, has been a director of about seven companies and has had several business interests over the years. In mid 2003 he desired to give effect to the provision of his late father’s Will to enable him to carry on the business as a partnership between his late father’s estate and a company under Mr Samuel Lederberger’s effective control which would act either as a bare trustee or as agent of the partnership. The Will was proved by Mrs Lederberger on 9 September 2003 and probate of the Will was granted to her. She is the executrix of the Will of her late husband’s estate and is the sole trustee of his estate.
In 2003 Mr Samuel Lederberger and Mr Israel Lederberger decided that the latter would sell his share to the former. Mr Samuel Lederberger wanted to protect himself against the debts of the business and sought the advice of Mr Lebovits who had been the accountant of the business during the life of his father and continued to be the accountant of that business until, it seems, recently. Mr Lebovits had been involved with the business affairs of the Lederberger’s business and in its structure but was not called to give evidence. Mr Samuel Lederberger said that Mr Lebovits had proposed a partnership structure of which Loaders Traders was to be a bare trustee for the partners. The partnership interests under the proposed structure were to be divided as to one third for the estate of Mr Hirsch Lederberger (as in fact occurred) and two thirds for Saminna Pty Ltd as trustee for the Samuel Lederberger Family Trust. The structure adopted was different in respect of the two thirds share to be held for interests controlled by Mr Samuel Lederberger but no explanation was given for the difference. The tax returns of the partnership identified the partners of the business as, first, the estate of the late Hirsch Lederberger and secondly, Lederberger Investments Pty Ltd. The tax returns for the partnership were prepared by Mr Lebovits and were signed by Mr Samuel Lederberger and by Mr Lebovits. The interests in the partnership were shown in the tax return to be one third and two thirds respectively. The business name shown for the partnership in the tax returns was “Loaders Manufacturers and Traders” with a tax file number of 800 731 622 and a partnership ABN of 15 921 975 885. At no stage has Mr Samuel Lederberger or Mrs Lederberger ever maintained in these proceedings that the partners who claimed and enjoyed the tax deductions were not lawfully entitled to the tax deductions which they claimed and enjoyed through the partnership although the consequence of their positions in this proceeding would appear to be that their claims were not lawful, that they (through their partnership and connected interests) have not paid the proper tax due and that they may each have made false declarations in tax returns.
Mr May met Mr Lebovits two or three times before 30 June 2006 and amongst the matters they discussed were the tax benefits of participation in the Blue Gum scheme. In the 2006 year that involved and necessitated contracts with the third and fourth named plaintiffs. In the 2007 year participation in the Mediterranean Olives scheme involved and necessitated contracts with the first and second named plaintiffs. Mr May understood from his discussions that Mr Lebovits was the external accountant to a business that was being conducted through a partnership which sought to obtain the benefit of tax deductions. There was no suggestion of anyone connected with Mr Samuel Lederberger embarking upon the activities of blue gum producers, or of olive producers, other than through participation in the projects suggested by Mr May that would secure the tax deductions. Mr May met with Mr Samuel Lederberger who advised that he was happy to proceed. The product disclosure statement for the Blue Gum project for the 2006 year and the Mediterranean Olives project for the 2007 year outlined the purpose of the transaction as being to carry on a business and that participation would secure tax benefits from any losses or expenditure in such businesses. Mr May knew that Mr Lederberger was seeking to contract for others. The existence of a principal was disclosed but the identity was not known to Mr May at least for the 2006 year. He did know from his discussions with Mr Lebovits that the principal was a partnership entity and that it was going to be through the partnership that the tax deductions would be claimed. That may be seen both from the oral testimony of Mr May as well as the contracts he executed pursuant to the power of attorney.
On 27 June 2006 Mr Samuel Lederberger signed (as part of an application form) an authority described as a power of attorney in respect of the Blue Gum project by which Mr May was authorised to enter into the necessary contracts with the third and fourth named plaintiff on behalf of the entity described as “the grower”. The grower’s name on the application was recorded as “Loaders Manufacturers and Traders” which was said to have been registered for GST. Loaders Traders was not, but the partnership was, registered for GST. Mr May knew that Mr Samuel Lederberger was signing the application on behalf of another party although he did not know at the time the identity of that party. Mr May executed the contracts with the third and fourth named plaintiffs pursuant to the power of attorney describing the other contracting party as “Loaders Manufacturers & Traders VIC 0359052S”. That Victorian business number had not been used in the application form signed by Mr Lederberger on behalf of “Loaders Manufacturers and Traders”.
The Victorian business registration number appears to have been added by Mr May’s staff without reference to Mr Lederberger or Mr Lebovits and without intending to alter the identity of the principal on whose behalf Mr Lederberger had signed the applications and authorised participation in either scheme. Mr May was cross examined about how the business number came to be on the documents identifying the party contracting as grower:
MR KORMAN: When you took the forms back with you, you or agents in your company or workers looked up the business name in the government records, didn't they?
MR MAY:I presume you are talking in terms of the - - -
MR KORMAN: Loaders Manufacturers and Traders?
MR MAY:--- The business number.
MR KORMAN: Yes, that business name and the registration number, you looked that up, didn't you?
MR MAY:I don't have any recollection of how that number got on to any of the documents. I don't know whether - I don't recall doing it myself. My staff might have; I can't say.
MR KORMAN: Can you think of any other way that that number would have got on?
MR MAY:It certainly wasn't from Mr Lederberger at that meeting on 27 June '06, because it certainly wasn't, to the best of my knowledge, at that time.
MR KORMAN: Would anybody in your company have looked at that record at the time of preparing the contracts, the record on the government database?
MR MAY:May well have. I don't know that for a direct fact, as a direct fact.
MR KORMAN: But the only way that number could have gotten there is if somebody from your company had looked it up?
MR MAY:I presume so.
MR KORMAN: Have you looked at that record since then?
MR MAY:I don't recall ever having looked at it at the beginning or certainly not recent times.
There was no suggestion that Mr May was seeking to execute the documents for a person as grower other than for the partnership for which Mr Lederberger had sought to secure participation in a tax effective transaction. The completed contracts were subsequently sent by the plaintiffs to Mr Samuel Lederberger and, as I have said, the partners of the partnership described as “Loaders Manufacturers & Traders” filed a partnership tax return claiming, and obtaining the benefits of, participation in the Blue Gum scheme for the 2006 year. The estate of Hirsch Lederberger filed a tax return for the 2006 financial year declaring as income its share of partnership income in accordance with the partnership return and, thereby, secured the benefits of the deductions which had been claimed by the partnership. The returns were completed by Mr Lebovits on Mr Samuel Lederberger’s instructions.
In 2007 Mr May again met with Mr Lebovits on a number of occasions regarding an investment in a transaction similar to the Blue Gum transaction but on this occasion involving olives. Mr May again talked about the taxation consequences that flowed from a ruling for the product by the Commissioner of Taxation and in the discussions with Mr Lebovits Mr May was aware that there was a business partnership which would be claiming the tax deductions. On 14 June 2007 Mr Samuel Lederberger signed (as part of an application form) an authority described as a power of attorney in respect of the Mediterranean Olives project for the 2007 year. The grower’s name on the application was recorded as “Loaders Manufacturers and Traders” which was said to have been registered for GST. As I have said Loaders Traders was not, but the partnership was, registered for GST.
Mr Samuel Lederberger did not add the business number to the documents he signed and in which he identified the entity seeking participation in the Mediterranean Olives scheme in 2007. Mr May signed each of the contracts with the first and second named plaintiffs on behalf of the grower pursuant to the power of attorney signed by Mr Samuel Lederberger. The party contracting as the grower was again described as “Loaders Manufacturers & Traders VIC 0359052S”. The Victorian business number was not on the application signed by Mr Lederberger on behalf of “Loaders Manufacturers & Traders”. Again tax returns were filed by the partnership claiming, and obtaining, the benefit of the tax deductions which participation in the Mediterranean Olives project secured. A partnership tax return for the 2007 year was lodged with the Commissioner of Taxation claiming, and obtaining, the benefit of the deductions available through the Mediterranean Olives project. Question 59 of the 2007 partnership return recorded that a loss had been distributed to the estate of the late Hirsch Lederberger of which Mrs Lederberger was the trustee. The estate filed a tax return for the 2008 financial year declaring as income a share of the estate’s partnership income or loss from “Loaders Manufacturers and Traders” and was signed by Mr Samuel Lederberger. A partnership tax return for the 2008 financial year of the partnership so styled was returned disclosing a loss distributed to the estate for that year. The partnership accounts recorded non-operating expenses, fees paid or payable to the plaintiffs in respect of the Blue Gum project and the Mediterranean Olives project. That return was signed by Mr Samuel Lederberger.
In my view it is clear that the plaintiffs were contracting with the partners of the partnership who in fact claimed, and obtained the benefit of, the substantial tax deductions secured through participation in the two projects. The application form with the first plaintiff identified Loaders Manufacturers & Traders as the relevant grower. The application asked whether that entity was registered for GST and, in Mr Samuel Lederberger’s hand, there was circled the word “yes” in the 2006 application form and the box marked yes was ticked in the 2007 application form that he signed. The partnership was registered for GST whilst Loaders Traders was not. The documents subsequently entered into by Mr May pursuant to the power of attorney to give effect to the applications made by Mr Samuel Lederberger on behalf of a disclosed but unidentified principal described Loaders Manufacturers and Traders as the “grower”. A sub-lease was entered into dated 30 June 2006 describing the landholder as WA Blue Gum Limited (the fourth plaintiff) and the grower as “Loaders Manufacturers & Traders” with the company number “VIC 0359052S”. A loan agreement was entered into for the 2006 year with Albany Finance Pty Ltd (the third plaintiff) as financier and “Loaders Manufacturers & Traders VIC 0359052S” as grower. A project management contract was entered into for the 2006 year between WA Blue Gum Limited (the fourth plaintiff) and Loaders Manufacturers & Traders VIC 0359052S as the grower. All of these documents permitted the 2006 returns to be prepared (and financial advantage to be obtained) and no complaint was ever made by the defendants until these proceedings. No complaint was made or correction sought by the defendants about the description of the party to participate as grower when the parties entered into the 2007 transactions involving the Mediterranean Olives project. By this stage there could have been no doubt in the minds of the defendants that the parties who had contracted in the 2006 year, who had claimed the tax deductions in that year and who were about to contract for the 2007 year to the same effect had been described as “Loaders Manufacturers & Traders” including the number “VIC 0359052S”.
Corresponding contracts for the 2007 project were entered into through Mr May with the grower described as “Loaders Manufacturers & Traders” with the number “VIC 0359052S”. In respect of the 2007 year there were also a number of formal contracts created and made available to Mr Lederberger through his and the defendants’ accountant. One was a Loan Agreement between Mediterranean Olives Financial Pty Ltd (the first plaintiff) as financier and Loaders Manufacturers & Traders VIC 0359052S as grower. Another was an Irrigation Lease and Licence Agreement 2007 between Mediterranean Olives Estate Limited (the second plaintiff) as project manager and Loaders Manufacturers & Traders VIC 0359052S as grower. A third was a Grove Lease 2007 between Mediterranean Olives Estate Limited (the second plaintiff) as project manager and Loaders Manufacturers & Traders VIC 0359052S as grower. A fourth was a Management Agreement 2007 between Mediterranean Olives Estate Limited (the second plaintiff) as project manager and Loaders Manufacturers & Traders VIC 0359052S as grower. The application form prepared by Mr Lebovits, and signed by Mr Samuel Lederberger, identified the applicant as Loaders Manufacturers & Traders with an ABN of 15 921 975 885 and as registered for GST.
I am unable to accept the principal contention by the defendants that each of the contracts with the plaintiffs were entered into by the entity which had registered the business name “Loaders Manufacturers & Traders” for the period rather than the partners who had claimed the tax deductions and who traded in partnership by that name and for whose benefit Loaders Traders held the registration of the business name. The defendants’ contention was that the identification of the grower by reference to the Victorian business name registration number 0359052S must necessarily have been a reference to Loaders Traders rather than to the partners of the partnership notwithstanding that the application forms signed by Mr Lederberger in June 2006 and June 2007 had not used the number, that the principal for whom he was signing was said to be registered for GST (which Loaders Traders was not), that Loaders Traders was not likely to benefit from any tax deduction in 2006 or 2007, that the partners and not Loaders Traders in fact claimed the tax deduction and that the partners have not sought to correct any error in lodgement of any tax return.
The defendants’ submission was maintained on the basis that Loaders Traders had registered the business name “Loaders Manufacturers & Traders” for the period from 22 February 2005 to 8 October 2008 rather than anyone else. A certificate as to registration of the business name for that number was tendered in evidence showing that the business name was registered from 8 August 1975 to 16 August 2002 by Mr Hirsch Lederberger. From 16 August 2002 to 22 February 2005 it was Mr Samuel Lederberger and Mr Israel Lederberger. From 22 February 2005 to 8 August 2008 it was Loaders Traders. A change of business details was prepared and signed by Mr Lederberger on 22 February 2005 changing the name of the business owner from the two brothers to Loaders Traders. However, on 28 November 2003 Loaders Traders made a declaration of trust acknowledging and declaring, amongst other things, that it acted as a bare trustee for the partnership between the estate of the late Mr Hirsch Lederberger and Lederberger Investments. The declaration made clear that it was the partnership which carried on the business under the name or style of “Loaders Manufacturers & Traders” and that the trustee (namely, Loaders Traders) wished to document the trust relationship for the partnership in the way I have previously described. The subsequent identification of the contracting party as grower by reference to the Victorian registered business name does not show that it was contracting on its own behalf but, rather, that it was the partnership contracting by reference to a business name held on behalf of the partners for their benefit.[14]
[14]Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154; see also Re ABC Plastik Pty Ltd (1975) 1 ACLR 446; Press v Mathers [1927] VLR 326, 333 (Dixon JA); and Re Johnson; Ex parte Greendale Engineering and Cables Ltd (1967) 11 FLR 335, 343 (Gibbs J); Aikman v Brown (1973) 1 ACTR 121, 123 (Fox J).
It is common for an agent to act on behalf of an unidentified principal[15] and the undisclosed principal does not avoid liability made on the principal’s behalf.[16] Mr Samuel Lederberger did not contend that in completing the application forms for the 2006 and 2007 projects he was purporting to act in his own right and indeed, his evidence and objective circumstances are wholly inconsistent with him intending to contract in his own capacity or to contract on behalf of Loaders Traders acting as bare trustee, because it would not be able to use the benefits of the tax deductions which his own evidence made clear he was keen to secure for the benefit of a taxpayer expected to make taxable profits. The forms he signed were forms identifying a contracting party other than himself and the nature of the contracts, the surrounding circumstances and the objectives to be secured by the contracts make clear that the party for whom he was authorising Mr May to contract was the party that would obtain the benefits of the tax deductions. The only possible evidence in support of the contention now maintained (and inconsistent with his own stated desire to reduce the tax payable by the entity likely to make a profit in the years in question and inconsistent also with the tax returns as lodged) is the number of the Victorian registered business name which, in any event, was held on behalf of the partners. In the circumstances I cannot accept the defendants’ contentions that the partners of the partnership were not the contracting parties. The contracts with the plaintiffs set out the partnership by name as the contracting party as grower and the registered Victorian business number was held by a bare trustee for the benefit of the partners who were in fact trading by that name. The contracts with the plaintiffs sought to contract with the party which had been identified in the application forms signed by Mr Samuel Lederberger and they did not identify the party by reference to the Victorian business number, rather the forms signed by Mr Samuel Lederberger identified a party as Loaders Manufacturers & Traders as having an ABN and as being registered for GST (which the partnership was and Loaders Traders was not).
[15]Carminco Gold & Resources Ltd v Findlay& Co Stockbrokers (Underwriters) Pty Ltd (2007) 243 ALR 472.
[16]Siu Yin Quan v Eastern Insurance Co Ltd [1994] 2 AC 199, 207 (Lord Lloyd).
The completion of the application forms in the 2006 and 2007 years triggered the rights and obligations flowing from the package of agreements in each of the two products.[17] Specifically they permitted Mr May to execute contracts pursuant to a general power of attorney.[18] Mr May was authorised by Mr Lederberger as agent for the partnership to execute the necessary agreements. The arrangements explained in the respective product disclosure statements enabled the substantial tax benefits to be secured by the necessary documents being entered into pursuant to the power of attorney. That is what occurred.
[17]Hance v Federal Commissioner of Taxation (2008) 74 ATR 644.
[18]Ibid.
It follows that the partners of Loaders Manufacturers & Traders, and for present purposes, Mrs Lederberger in particular, are liable to the plaintiffs. Each partner is liable jointly with his or her other partners for all debts and obligations of the partnership incurred whilst a partner.[19] The liability of Mrs Ledererger as trustee is not limited to the assets of the estate of which she is trustee.[20]
[19]Partnership Act 1958 (Vic) s 13.
[20]Vacuum Oil Company Pty Ltd v Wiltshire (1945) 72 CLR 319, 324 (Latham CJ); Octavio Investments Pty Ltd v Knight (1979) 144 CLR 360, 367-368 (Stephen, Mason, Aickin and Wilson JJ); JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7th ed, 1998), 562-4 [2102].
The occasion does not arise to consider the plaintiffs’ alternative contention, namely that Mr Samuel Lederberger was acting in his own right when applying to participate in the Blue Gum scheme in 2006 and the Mediterranean Olives scheme in 2007. The conclusions I have reached about him seeking the participation of the partners in the scheme makes it inappropriate to consider an alternative hypothesis which is fundamentally inconsistent with the facts as I have found them. The alternative submission may, however, be relevant to costs. In that context it may be sufficient to note that the plaintiffs’ alternative contention (namely of Mr Samuel Lederberger acting in his own right) is one which may be seen as a consequence of the defendants’ disavowal of the partners as the parties on whose behalf he had sought to authorise participation in the two schemes. It was clear that he had signed the application forms for someone and if not for the partners, then a plausible option was that he was doing so on his own behalf.
It was contended by the defendants, and in particular by Mrs Lederberger, that the partners were not each liable for the debts of the partnership because the debts were not incurred in carrying on the business in the usual way a business of the kind was carried on by the firm. Section 9 of the Partnership Act 1958 (Vic) provides:
Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.
Counsel for Mrs Lederberger, and counsel for the third party, emphasised the difference in the partnership’s primary business as compared to either growing blue gum or Mediterranean olives.
It may readily enough be accepted that the reality of importing, wholesaling and selling camping goods is fundamentally different from the reality of the activities in a business of growing blue gums or olives. However, that kind of broad description of businesses overstates the true situation in this case. The businesses carried on by the partners by participation in the blue gum and olive tree transactions did not involve them in physical activity themselves. Their participation in a business for tax purposes arose by virtue of the legal rights and obligations created through activity carried on by others.[21] The business carried on through the partners’ participation in the Blue Gum and Mediterranean Olives projects was through the agency created by the agreements.[22] There was no sense in which the activities of the partners would ordinarily be regarded as themselves being involved in growing trees or olives beyond the legal conclusions flowing for tax purposes from entering into legal relations. Participation in the business of blue gum growing and olive growing from the point of view of the partners (and judged from the point of view of that commercial partnership) was little more than an incident of dealing with its profits and its tax liabilities. Participation in the tax effective scheme was incidental to the partners’ business purposes of maximising business profits and participating in legally available products to reduce a tax liability.[23] That, indeed, was the evidence of Mr Lederberger which I set out in paragraph 2 above. The transactions may be seen to flow from, be incidental to, and to form a part of the ordinary activities of the business of, the partnership.[24] The primary activity of the partnership was no doubt that of importing, wholesaling and selling camping goods but its business activities included other activities such as investments and the marshalling of its profits, its cash and its economic resources, and the maximising of its overall returns. There is no meaningful sense in which participation in the tax effective products can be said to be outside the usual way the business of the partners was carried on.
[21]Cooke v Federal Commissioner of Taxation [2002] FCA 1315; Federal Commissioner of Taxation v Cooke [2004] ATC 4268; Vincent v Federal Commissioner of Taxation (2002) 124 FCR 350; Ferguson v Federal Commissioner of Taxation (1979) 9 ATR 873; Federal Commissioner of Taxation v Brand (1995) 31 ATR 326; Merchant v Federal Commissioner of Taxation (1999) 41 ATR 116; Federal Commissioner of Taxation v Lau (1984) 6 FCR 202; Federal Commissioner of Taxation v Emmakell Pty Ltd (1990) 22 FCR 157; Hance v Federal Commissioner of Taxation (2008) 74 ATR 644, 667 (Finn, Dowsett and Edmonds JJ); Howland-Rose v Federal Commission of Taxation (2002) 118 FCR 61.
[22]Cooke v Federal Commission of Taxation [2002] FCA 1315, [60] (Stone J).
[23]Cooke v Federal Commission of Taxation [2002] FCA 1315; Federal Commission of Taxation v Cooke [2004] ATC 4268; Federal Commission of Taxation v Cooling (1990) 94 ALR 121; Federal Commission of Taxation v Montgomery (1999) 198 CLR 639.
[24]Federal Commission of Taxation v Cooling (1990) 94 ALR 121, 135-6 (Hill J with Lockhart and Gummow JJ agreeing).
Counsel for Mrs Lederberger also propounded largely emotive, but unpersuasive, submissions against her liability for partnership debts. In that vein, her counsel submitted:
It would be most unfair if this Court were to hold Mrs Lederberger, an 89 year old lady, accountable for agricultural business debts, of which she was totally unaware, on the basis that she was committed, unbeknownst to her, to personal liability for those debts by her son Sam.
Her evidence to support those submissions included other emotive evidence beginning with her birth in Poland in 1921 and broad assertions of a lack of belief in “such schemes” as had been entered into through Mr May. However, her evidence was also that Mr Samuel Lederberger was in charge of the business which she knowingly allowed him to run, and which he did run, on behalf of the partnership created by the Will. In Polkinghorne v Holland[25] the High Court considered the liability of innocent partners from the culpable action of another saying:
By associating themselves in a partnership with Harold Holland, the respondents made themselves responsible, as principals are for an agent, for all his acts done in the course of his authority as a partner. That authority was to do on behalf of the firm all things that it is part of the business of a solicitor to do. If, in assuming to do what is within the course of that business, he is guilty of a wrongful act or default, his partners are responsible, notwithstanding that it is done fraudulently and for his own benefit. But, to make his co-partners answerable, it is not enough that a partner utilises information obtained in the course of his duties, or relies upon the personal confidence won or influence obtained in doing the firm’s business.[26]
In Weyers v Commissioner of Taxation[27] Dowsett J said in the context of a taxing provision dependent upon the conduct “expected of a reasonable person in the circumstances”:
It is tempting to exonerate Mrs Weyers from these criticisms on the grounds of her assumed lack of business experience and reliance on her husband. However it would be anachronistic to assume that a female taxpayer’s duty in connection with the revenue is somehow of a lower order than that of a male taxpayer. Indeed, if her experience is less, her duty to inquire may be greater.[28]
Whatever may have been the business experience of Mrs Lederberger, she undoubtedly knew that a business was being conducted and she knew that it was her son who had the day to day management of it just as her husband did during his lifetime. Mrs Lederberger no doubt had full trust and confidence in Mr Samuel Lederberger[29] and was permitted fully to act for the partners in that business. He acted in his capacity as agent for Lederberger Investments and for the estate of which Mrs Lederberger was the trustee when applying to participate in the Blue Gum and Mediterranean Olives schemes.[30] Mrs Lederberger made no case against her son that he exceeded his authority or that he was liable for any loss to which his actions had exposed her.
[25](1934) 51 CLR 143.
[26]Ibid 156-7 (Rich, Dixon, Evatt and McTiernan JJ).
[27](2006) 63 ATR 268.
[28]Ibid [159].
[29]Garcia v National Australia Bank Ltd (1998) 194 CLR 395, 403 (Gaudron, McHugh, Gummow and Hayne JJ)
[30]Capricorn Financial Planners Pty Ltd v Australian Securities and Investments Commission (1998) 31 ASCR 46, [7]-[14] (Burchett J).
It was contended that the contracts entered into by Mr May pursuant to the power of attorney exceeded his authority because he had not been authorised by the partners to do so. I do not accept that submission because it is clear that Mr Samuel Lederberger had complete authority to act on behalf of the partners and was known to do so. It may, therefore, be unnecessary for me to consider whether either or both of Mrs Lederberger and Lederberger Investments ratified the entry of some party or parties into the agreements pursuant to the power of attorney but, it may be desirable for me to say something on that issue. A conclusion of ratification requires that a principal have ratified the unauthorised act of an agent by language or conduct that is unequivocal.[31] Ratification is “a unilateral act of the will” which may be “expressed in words or implied from or involved in acts” and need not be communicated to the party relying upon it.[32] In this case the evidence all points to ratification of any unauthorised entry into the agreements pursuant to the power of attorney by Lederberger Investments, by Mrs Lederberger and by Mr Samuel Lederberger. Mrs Lederberger left the running of the business to Mr Samuel Lederberger and Lederberger Investments. It was Mr Samuel Lederberger who was the natural person responsible for management of the affairs of the partnership. This fact was known to Mrs Lederberger and was clear from her testimony as well as that of Mr Samuel Lederberger. The tax returns claimed the losses on the investments and secured the benefits which the investments were designed to provide and which were entered into to secure. The tax returns were prepared by the long standing accountant who declared the contents to be true and correct. Mr Samuel Lederberger declared likewise on behalf of the partners of the partnership, Lederberger Investments and on his own behalf. In doing so both the accountant and Mr Samuel Lederberger by express statements and conduct ratified on behalf of the partners the agreements entered into pursuant to the powers of attorney. No amended returns had been filed suggesting that the expenses were not allowable as deductions for the partners as they had been claimed. Mrs Lederberger prepared and signed the 2006 trust tax return further ratifying the contracts from which she obtained financial benefit.
[31]GE Dal Pont, Law of Agency (2001) [5.27].
[32]Harrison & Crossfield v London and North Western Railway [1917] 2 KB 755, 758 (Rowlatt J).
The plaintiff has tendered evidence of the business records kept by each of the plaintiffs and I am satisfied that they are owed the following amounts as at 16 May 2011, namely:
a) Mediterranean Olives Financial Pty Ltd, the first plaintiff, is owed a total of $360, 983.04. This includes the principal sum of $298,140.80, plus interest of $62,842.24;
b) Mediterranean Olives Estate Ltd, the second plaintiff, is owed a total of $814,125.88. This includes a rental fee of $87,638.49, an insurance fee of $4,503.31, a management fee of $629,950.51 and an irrigation leasing fee of $92,033.57;
c) Albany Financial Pty Ltd, the third plaintiff, is owed a total of $269,049.75. This includes the principal sum of $240,704.58, plus interest of $28,345.17; and
d) WA Blue Gum Ltd, the fourth plaintiff, is owed a total of $249,106.95. This includes a rental fee of $182,056.14, an insurance fee of $16,041.82 and a management fee of $51,088.99.
The plaintiffs also seek interest pursuant to statute from 16 May 2011.
The issues between Mrs Lederberger and the third party largely overlap with those raised between Mrs Lederberger and the plaintiffs. The third party adopted many of the submissions raised on behalf of Mrs Lederberger (and also those on behalf of Mr Samuel Lederberger) to the effect that there was no liability arising in the partners of the partnership. Having decided those claims against Mrs Lederberger the more narrow issue remaining as between her and the third party is the extent to which any liability she has is due to any negligence on their part.
The third party is the firm of solicitors, Sterling & Sheink, who acted for Mrs Lederberger at the time she sought probate of her late husband’s Will and, in effect, became a partner in the partnership conducted with Lederberger Investments through her son Mr Samuel Lederberger. Her claim against her former solicitors is that they were retained on or about 18 October 2000 as executrix of the Will of her late husband to prove the Will, to obtain a grant of probate, and to advise her as to what was required to obtain probate. It was an implied term of that retainer that her solicitors would perform their services with due care and responsibility.[33] It may also be assumed that the duty owed to her was not narrow but extended to advise her on all matters that she might reasonably need to be advised upon in connection with the retainer. The relationship between lawyer and client is one in which the client is dependent upon the skill and expertise of the lawyer.[34] The lawyer’s duty may not be wholly discharged upon completion of a specific retainer because in some circumstances there may be a duty for the lawyer to advise on matters about which the client may not realise may require professional legal advice unless the matter is first drawn to the client’s attention as needing consideration.[35]
[33]Astley v Austrust Ltd (1999) 197 CLR 1, 21-2 (Gleeson CJ, McHugh, Gummow and Hayne JJ).
[34]Hawkins v Clayton (1988) 164 CLR 539, 578-9 (Deane J).
[35]Leda Pty Ltd v Weerden [2007] ATC 4708.
The next step in Mrs Lederberger’s contentions against her former solicitors was, however, the much wider proposition that the retainer in respect of seeking probate of the Will “did not exclude or in any way limit the ambit of Mrs Lederberger’s tortious remedy”. So wide a statement of the duty cannot be accepted as that imposed upon the solicitors unless the statement is to be understood as no more than a factual indication that some specific matters alleged to fall within the duty was not, in fact, expressly excluded.
In this case counsel for Mrs Lederberger contended that in considering the ambit of the solicitors’ duty it was appropriate to have regard to the experience and expertise of Mrs Lederberger. The specific act of negligence relied upon by Mrs Lederberger against her former solicitors was a failure by them to advise her that if she proved the Will of her late husband and obtained a grant of probate as executrix thereof, then she, as the trustee of one equal third part of the business carried on under the name and style of “Loaders Manufacturers and Traders”, would be liable personally for all debts of the business if it continued to trade. In Austrust Pty Ltd v Astley[36] Mullighan J found a solicitor liable in tort and contract in failing to advise a client not to accept an appointment as trustee of a proposed trust to establish a piggery on land in New South Wales without excluding its personal liability for losses arising in the course of carrying out the trust. Mullighan J said in relation to the plaintiff’s claim of negligence:
In considering these matters, it is appropriate to have regard to the experience and expertise of the plaintiff and what action it took independently of the defendants. These matters are also of importance in determining the nature and extent of the duty of care and whether Mr Astley was in breach of it.[37]
Mrs Lederberger draws an analogy from this case with her own circumstances.
[36](1993) 60 SASR 354.
[37]Ibid 372.
Mr Granek was the solicitor at Sterling & Sheink acting for Mrs Lederberger on the probate of her late husband’s Will. He did not assert that the firm gave Mrs Lederberger the advice in the terms pleaded against him. The firm maintained, however, that the liability to which she was exposed was not foreseeable at the time he was acting for her in relation to probate of the Will. Mrs Lederberger’s unchallenged evidence was as follows:
If Mr Granek had told me that I would be responsible personally for debts of the business, I would have said to him that unless there was a way that I could receive a third of the income without being responsible, then I wanted no income from the business and nothing to do with it. I love my sons, but there is no way in the world that I would have put my personal assets at risk for a business that I had no understanding of, control over or involvement with.
Care must be taken when evaluating the subjective evidence of a witness[38] especially where the subjective evidence relates to a hypothetical course of conduct upon events and circumstances which were not specifically known at the time the hypothetical needs to be considered and which needs to be established with probative evidence.[39] I am unable to accept her assertion as probative of what would have occurred had advice been given to Mrs Lederberger by Mr Granek that she would personally be responsible for debts if she had become trustee of her late husband’s estate in partnership with interests connected with her husband. The assertion of a subjective hypothetical position on events which did not occur is not sufficient to persuade me that she would have acted as asserted.
[38]Riley v Penttila [1974] VR 547, 572 (Gillard J).
[39]Commonwealth v Amann Aviation (1991) 174 CLR 64, 118-126 (Deane J), 141-4 (Toohey J); Orica Australia Pty Ltd v Limit (No. 2) Ltd [2011] VSC 65.
Even accepting her evidence at face value, however, it would still be necessary to establish a reliable causative link between the negligence and the damage. It is not sufficient for the solicitors to be found liable for damage by showing that the damage would not have occurred “but for” the negligence.[40] What must be shown is a reliable causative relationship based upon considerations of proximity and a functional evaluation[41] linking the fault reliably with the damage.[42] Causation is a question of fact[43] to be established upon probative evidence that, as a matter of ordinary common sense and experience, the loss was caused by the breach.[44]
[40]March v Stramare Pty Ltd (1991) 171 CLR 506 esp 522-4 (Deane J); Chappel v Hart (1998) 195 CLR 232, 242-4 (McHugh J); Tabet v Gett 240 CLR 537, 578 (Kiefel J).
[41]Barnes v Hay (1988) 12 NSWLR 337, 353 (Mahoney JA); Henville v Walker (2001) 206 CLR 459, 491 (McHugh J).
[42]March v Stramare Pty Ltd (1991) 171 CLR 506 esp 522-4 (Deane J); Chappel v Hart (1998) 195 CLR 232, 242-4 (McHugh J).
[43]Bennett v Minister for Community Welfare (1992) 176 CLR 408, 412-3 (Mason CJ, Deane and Toohey JJ).
[44]March v Stramare Pty Ltd (1991) 171 CLR 506, 522 (Deane J).
The retainer between Mrs Lederberger and Mr Granek is not analogous to that considered in Astley v Austrust Ltd.[45]In that case the client had sought general advice from the solicitors in relation to its intention to assume the position of trustee of an existing trading trust which failed shortly after Austrust took office. The venture causing liability in Mrs Lederberger to the plaintiffs arose from something which was not in contemplation at the time she instructed Mr Granek to obtain probate of her late husband’s Will. The loss occasioned from the partnership’s participation in the Blue Gum and Mediterranean Olives scheme was far from flowing from the “usual course of things” from the solicitor’s breach.[46] Furthermore, amongst the circumstances relevant to the extent of any duty upon Mr Granek was that the retainer arose in the context of giving effect to the intentions expressed in the Will in which a business previously conducted by her husband was to be conducted through her son. It may readily be accepted that Mr Granek ought to have advised his client about the exposure to personal risk by becoming trustee of an estate in partnership with others of a business conducted by her son but the failure to do so cannot be said to have caused the loss arising from the decisions made by her son in the course of running the business in which she was a partner. The solicitor’s failure does not become for Mrs Lederberger a tortuous indemnity for all risks and losses arising from her role as trustee. The outcome might, of course, have been entirely different if Mr Granek, or his firm, had been asked to act on her behalf in entering into the transactions with the plaintiffs and he had failed to advise her about the risks that might arise from her role as trustee in entering into the transactions as partner. Such a situation would have been more analogous to that in the Austrust case upon which she relied than the facts which actually occurred.
[45](1999) 197 CLR 1; Austrust Pty Ltd v Astley (1993) 60 SASR 354.
[46]Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145, 151 (Alderson B); NC Seddon and MP Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th Australian ed, 2008) 117 [23.39]; JW Carter, Elisabeth Peden and GJ Tolhurst, Contract Law in Australia (5th ed, 2007) 825 [35-29].
No claim of contributory negligence was made as between Mrs Lederberger and the third parties.
In the event I will dismiss the third party claim and make the following orders, namely, that:
a) The first defendant pay the first plaintiff the sum of $298,140.80 together with interest of $62,842.24 up to 16 May 2011, and interest pursuant to statute for the period after 16 May 2011.
b) The first defendant pay the second plaintiff the sum of $814,125.88 and interest pursuant to statute for the period after 16 May 2011.
c) The first defendant pay the third plaintiff the sum of $240,704.58 together with interest of $28,345.17 up to 16 May 2011, and interest pursuant to statute for the period after 16 May 2011.
d) The first defendant pay the fourth plaintiff the sum of $249,106.95 and interest pursuant to statute for the period after 16 May 2011.
e) The third party claim is dismissed.
I will hear the parties on any application for costs.
SCHEDULE OF PARTIES
| No. 1385 of 2010 | |
| BETWEEN: | |
| MEDITERRANEAN OLIVES FINANCIAL PTY LTD | Firstnamed Plaintiff |
| MEDITERRANEAN OLIVES ESTATE LTD | Secondnamed Plaintiff |
| ALBANY FINANCIAL PTY LTD | Thirdnamed Plaintiff |
| WA BLUE GUM LTD | Fourthnamed Plaintiff |
| - and - | |
| GITA LEDERBERGER | Firstnamed Defendant |
| SAMUEL LEDERBERGER | Secondnamed Defendant |
| STERLING & SHEINK (a firm) | Third Party |
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