Moffa & Anor v Newmark Commercial Pty Ltd & Ors (2) No. DCCIV-99-1861

Moffa & Anor v Newmark Commercial Pty Ltd & Ors (2)
[2003] SADC 148
Judge Lee
Civil

I delivered my principal reasons in this matter on 20 March 2003, and then invited counsel to make submissions on certain outstanding issues. In these supplementary reasons, I will deal with the outstanding issues under the following headings: the remaining causes of action, against which parties judgment should be entered, interest and costs. I will also deal with the plaintiffs’ recent application to re-open their case.
The remaining causes of action
In my principal reasons for judgment, I held that Newmark Commercial, through Horner and D’Alessandro, committed breaches of duty to the plaintiffs, in its capacity as agent and fiduciary, in several respects. I found that Newmark Commercial acted on both sides of the sale of the property, that is, as agent for the plaintiffs and as adviser to the purchaser; that Newmark Commercial’s relationship with the purchaser and the advice which it tendered to him in the course of the relationship were unknown to the plaintiffs at the time; that had the relationship and the advice been disclosed to the plaintiffs, they would not have sold the property in November 1998; that had the relationship and knowledge of the rise in the property market from early 1999 been disclosed to the plaintiffs, they would have exercised their rights under clauses 6 and 7 of the contract after the purchaser had failed to meet the 29 January 1999 deadline; that the plaintiffs did not sell the property for less than market value; and that their loss arose from a lost opportunity to investigate how they might have optimised their investment in the property at some later time. I found also that representations were made to the plaintiffs that a sale at $340,000 would leave the plaintiffs with a builders yard at no cost to them, but such representations were not false, and in any event the plaintiffs were not induced thereby to enter into the contract of sale.
I should add that I am not satisfied that the defendants acted negligently in failing to advise the plaintiffs to advertise the property. Nor am I satisfied that such failure was productive of loss.
In essence, the actionable conduct of Newmark Commercial, through Horner and D’Alessandro, took the form of breaches of duty as agent and fiduciary rather than any false representation about either the value of the property or the benefit of the contract. In the result, there were, as I find, no representations which would be actionable against any of the defendants in negligence or under the Misrepresentation Act (SA), the Fair Trading Act (SA) and the Trade Practices Act (Clth).
Against which parties should judgment be entered
In my principal reasons for judgment, I found that the plaintiffs had made out two causes of action, namely breach of the contract of agency and breach of fiduciary duty.
I do not attach any significance to the failure of paragraph 32 of the Statement of Claim to allege a breach of fiduciary duty against other than Newmark Commercial. With respect to Horner, the prayer for relief seeks orders against him for breach of fiduciary duty. With respect to D’Alessandro, the trial was fought on all sides upon the footing of an allegation, implied if not express, that he had been in breach of a fiduciary duty. It was common ground that Newmark Commercial acted only through Horner and D’Alessandro. In the result, I do not consider that an amendment to the Statement of Claim is necessary. If asked, however, I would be prepared to allow an amendment to paragraph 32. I refer to Rules 46.04(4) and 84.01(1).
The next question is whether Horner and D’Alessandro, an employee of Newmark Commercial in the case of the former and a director in the case of the latter, can be made liable for breach of fiduciary duty. In Finn on Fiduciary Obligations at para 469, the following passage appears:
“But these cases aside, the courts have had difficulties in adapting the conflict rule to chain relationships. It seems to be settled – though by no means satisfactorily – that where B is in a fiduciary relationship with A, and he employs C actually to perform part of his engagement with A, C will not, ipso facto, also be in a similar relationship with A. Consequently an employee is not necessarily a fiduciary of his employer’s beneficiary simply because, in the course of his employment, he does something which will ultimately benefit that beneficiary. The cases, however, give no real guidance as to when an A-C relationship will be fiduciary. The only working hypothesis which can be advanced is that if B is engaged by A to perform some service on his behalf, and then B passes that work onto C, C being given the substantial performance of B’s undertaking and knowing that what he is doing is for A’s benefit, then the A-C relationship will be a fiduciary one for the purposes of the services C in fact renders.”
In my opinion, the case before me falls within the second category discussed by Finn. Having taken on the substantial performance of Newmark Commercial’s undertaking and in the knowledge that what they were doing was for Newmark Commercial’s benefit, Horner and D’Alessandro can be treated as having been in a fiduciary relationship with the plaintiffs for the purposes of the services that they rendered.
In Powell & Thomas v Evan Jones (1905) 1 KB 11, an authority cited by Finn, the Court of Appeal said that a fiduciary relationship between a principal and a sub-agent engaged by the agent does not depend upon the existence of any privity of contract between the principal and the sub-agent.
In Grantwell v Franks (1993) 61 SASR 390, an authority cited by counsel for the plaintiffs, the Full Court was concerned with the conduct of an employee of a real estate company which had been engaged by purchasers with respect to the purchase of a commercial property. The majority of the Court held that the duties of a fiduciary were owed to the purchasers by both the employee and the company.
The authorities discussed in paragraphs 99 to 104 of the principal judgment show that the existence of a fiduciary relationship depends upon the nature of the relationship in any given case. In this case, I consider that the nature and proximity of Horner and D’Alessandro’s relationship with Moffa was such as to impose upon each of them, as well as upon Newmark Commercial, a fiduciary duty to the plaintiffs.
In the result, the plaintiffs are entitled to judgment against Newmark Commercial for breaches of duty as agent and fiduciary, and against each of Horner and D’Alessandro for breaches of duty as fiduciary.
Interest
Counsel for the plaintiffs submitted that I should award interest on the increase in the value of the property between the contract and the trial upon the footing that the plaintiffs have lost the use of that increase, either as cash upon the realisation of the asset or as equity to support a loan. I decline to do so. Interest is awarded to compensate a plaintiff for the detriment he has suffered by being kept out of his money: Batchelor v Burke (1981) 148 CLR 448. I emphasise the word “money”. Moreover, in my assessment of the plaintiffs’ damages, I have already taken into account the loss of use of the property as a potential head of damage.
There is no dispute that the plaintiffs are entitled to interest on the assessment from the date of the principal judgment.
Costs
The plaintiffs seek an order for solicitor-client costs, and rely upon pre-trial correspondence, the dates and contents of which are as follows:
Friday 29/6/01           Plaintiffs’ solicitors offer to accept instalments of $114,000 over five years in settlement of the action upon judgment being entered on the morning of Monday 2 July 2002 for $100,000 inclusive of both interests and costs. D’Alessandro and Horner were due to be cross-examined on discovery issues at 9:30am on that day.
Saturday 30/6/01        Defendants’ solicitors ask the plaintiffs to leave the offer open “until the defendants have had a reasonable opportunity to give the matter sufficient consideration”.
Sunday 1/7/01            Plaintiffs’ solicitors say they will allow an extension of half an hour.
The affidavit which exhibits copies of this correspondence says that the letter of 29 June 2001 was received by the defendants’ solicitors by facsimile at 4:24pm following a conference between the parties earlier in the day. The affidavit also discloses that the defendants were claimants for assistance under a claims support scheme following the liquidation of HIH. The extension of half an hour effectively meant that the defendants had no more than the weekend to consult the scheme managers and to make up their minds about the offer. I consider that the defendants’ request for an extension was reasonable, and that the extra half hour granted was unreasonable in the circumstances.
The plaintiffs also seek an order for solicitor-client costs upon the basis of an offer to accept $100,000 plus solicitor-client costs contained in a letter dated 11 November 2002. The trial commenced on 5 November 2002. The offer was said to lapse at the end of Moffa’s evidence. The plaintiffs had already filed an offer pursuant to Rule 41 to accept $230,000. The further offer did not reflect the timetable prescribed by Rule 41. I refer to the discussion of relevant principles by Debelle J in Pirrotta v Citibank Ltd (1998) 72 SASR 259. The plaintiffs said they would consent to an adjournment to enable the defendants to consider the offer, but an adjournment at that late stage may not have been granted, given the likely case flow management consequences.
I hold that the plaintiffs are not entitled to solicitor-client costs against the defendants.
The defendants submit that I should reduce the plaintiffs’ costs, because they failed on the main grounds of their claim, namely that they were induced by the defendants to enter into the contract by misrepresentations as to the price, and that the price was less than the market value of the property at the relevant time. Counsel for the defendants submitted that these grounds absorbed no less than 25% of the time of the trial. Counsel then argued that, if 25% is assigned to the plaintiffs’ failure and a corresponding 25% to the defendants’ success, the result should be an award to the plaintiffs of 50% of their costs overall.
Rule 101.02(1) provides: “Subject to these Rules, the costs of and incidental to a proceeding shall follow the event unless the Court otherwise orders.” So I have a discretion to vary the usual rule. I take the relevant principles from the judgment of Tooley J in the Federal Court in Hughes v Western Australian Cricket Association (1986) 8 ATPR 48,134 at 48,136:
‘The discretion must of course be exercised judicially. There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised. I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.
1.Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v. Godfrey (1920) 2 K.B. 47.
2.Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1 Q.B. 564.
3.A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense, but any disputed question of fact or of law. Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at p. 12.
There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy. Also it is necessary to keep in mind the caveat by Jacobs J. in Cretazzo v. Lombardi at p.16. His Honour sounded what he described as “a note of cautious disapproval” of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial. His Honour commented:
“But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.” ’
In Cretazzo v Lombardi, the plaintiff recovered damages for injuries received in a road accident, but the primary finding of the court at first instance was that the plaintiff was a malingerer who had consciously attempted to deceive the court as well as his medical advisers. In those circumstances, perhaps it is not surprising that the plaintiff was deprived of some of his costs. In sounding at page 14 of the report “a note of cautious disapproval of applications, which are being made with increasing frequency, to apportion costs according only to the success or failure of one party or the other on the various issues of fact or law”, Jacobs J noted that, although Forster v Farquhar was often relied upon, the plaintiff in that case claimed damages of some 394 pounds for breach of contract under four distinct heads, but only recovered 12 guineas under one head of damage.
I refer also to a comprehensive discussion of authority by the Full Court in Robinson v Australian Association of Social Workers Ltd (2000) 210 LSJS 73. In the end, the successful plaintiff’s costs in that case were reduced by 50% upon the basis, at least in part, of unreasonable conduct, given the primary judge’s finding that the plaintiff had made criticisms of the defendant at the trial that were “ill-founded and opportunistic”.
The position of the plaintiffs here is very different from the position of the plaintiffs in the above-mentioned cases of Cretazzo, Forster and Robinson. In establishing breaches of duty and an entitlement to the difference between the sale price and the market value of the property at the time of trial, the plaintiffs have substantially succeeded in their action against the defendants. They did not act unreasonably in seeking to establish as their preferred head of damage a difference between the sale price and the market value of the property in November 1998. Horner had encouraged them to sell, and they later became aware of the defendants’ relationship with the purchaser. So they were justified in apprehending that the property had been undersold. The opinions of their valuers supported their apprehension. Both heads of damage required the calling of valuation evidence. In the end, I have decided not to vary the usual rule that costs should follow the event. The plaintiffs are entitled to their party and party costs against the defendants to be taxed.
After the initiation of proceedings by summons against Newmark Commercial, Horner and D’Alessandro, the plaintiffs obtained leave by separate application to join Newmark Real Estate as a defendant. Given its successful no case to answer submission, Newmark Real Estate is entitled to the costs of and incidental to the plaintiffs’ application. All other costs can be attributed to the work done by the other defendants in their defence of the claim.
The plaintiffs’ application to re-open their case
As appears from my principal reasons for judgment, counsel for the plaintiffs submitted that there were a number of methods by which damages could be assessed, including the method that I chose in the end, namely the difference between the price that the plaintiffs received in November 1998 and the value of the property at the time of trial. I based my assessment of the value of the property at the time of trial upon the last valuation available to me, namely that of Mr Robert Brooke as at January 2001.
The plaintiffs now seek leave to recall Mr Brooke to give his opinion on the value of the property at the time of trial.
Although counsel for the plaintiffs submitted that the purpose of the application was to fill a gap or void in the evidence, the fact is that I assessed the difference upon the basis of the evidence before me at the time. My intention was that the assessment would be final and binding upon the parties. In effect, the plaintiffs are asking me to revisit my assessment for the purpose of substituting a fresh assessment upon evidence that was available to them at the time of trial. The usual rule is that it is desirable in the public interest that there be finality in litigation in other than the truly exceptional case: see, for example, Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 at 141-142.
The application is refused.
Final orders
1.    That there be judgment for the plaintiffs against the first, second and fourth       defendants in the sum of $160,000.
2.    That the first, second and fourth defendants pay to the plaintiffs the plaintiffs’ party and party costs of the action to be taxed.
3.    That the plaintiffs pay to Newmark (Real Estate) Pty Ltd its costs of and incidental to the plaintiffs’ application to join it as a defendant in the action.
4.    That the counter-claim be dismissed.

[2003] SADC 148

2 October 2003