Moloney v Anthony Grieve Pty Limited

[2009] NSWSC 747

CITATION:	Moloney v Anthony Grieve Pty Limited [2009] NSWSC 747
HEARING DATE(S):	27/07/2009
JUDGMENT DATE :	31 July 2009
JUDGMENT OF:	Hoeben J
DECISION:	Appeal allowed. Matter remitted to Local Court. Defendant to pay Plaintiff's costs. Defendant to have a certificate under s 6(1)(a) of the Suitors’ Fund Act 1951 if otherwise qualified.
CATCHWORDS:	APPEAL - appeal from Local Court to Supreme Court - whether finding open on the evidence - failure to provide proper reasons - failure to address correct question - failure to resolve essential factual issue.
LEGISLATION CITED:	Local Courts Act 1982
CATEGORY:	Principal judgment
CASES CITED:	Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 280-281
PARTIES:	Patrick John Moloney trading as Moloney Lawyers - Plaintiff Anthony Grieve Pty Limited - Defendant
FILE NUMBER(S):	SC 11758/2009
COUNSEL:	Mr B DeBuse - Plaintiff Mr D Ash - Defendant
SOLICITORS:	Moloney Lawyers - Plaintiff DTA Lawyers - Defendant
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	3318/2008
LOWER COURT JUDICIAL OFFICER :	O'Shane LCM
LOWER COURT DATE OF DECISION:	26/02/2008

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOEBEN J

Friday 31 July 2009

11758/2009 – Patrick John MOLONEY trading as MOLONEY LAWYERS v Anthony GRIEVE PTY LIMITED

JUDGMENT

1 HIS HONOUR: This appeal is brought pursuant to ss 73(1) and 74(1) of the Local Courts Act 1982. Those sections relevantly provide:

“73(1) The party to proceedings under this Part who is dissatisfied with the judgment or order of a Court sitting in its General Division may appeal to the Supreme Court against the judgment or order, but only as being erroneous in point of law.”
“74(1) A party to proceedings under this Part who is dissatisfied with the judgment or order of a Court sitting in its General Division may appeal to the Supreme Court against the judgment or order on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court.”

2 The matter was heard by her Honour O’Shane LCM on 23 February 2009. Her Honour delivered judgment on 26 February 2009. The matter proceeded before her Honour as to liability only and her Honour found in favour of the plaintiff. After her Honour handed down her decision, the parties agreed quantum and subject to this appeal, judgment was entered in favour of the plaintiff for $18,835.50 plus interest plus costs. Accordingly, the matter came to this Court as a final judgment.

Factual background

3 The plaintiff in these proceedings (the defendant in the proceedings before her Honour) is a solicitor. In September 1998 he and Nicholas Eddy, established the firm Eddy and Moloney, solicitors and attorneys. At that time he was a partner in the firm. From August 1999 the firm continued to trade as Eddy and Moloney but the plaintiff was no longer a partner and had become an employed solicitor. That proposition was supported by business name extracts, the evidence of the plaintiff and was not challenged in the proceedings.

4 In early 2003 Eddy and Moloney was engaged by Afifco Constructions Pty Limited (Afifco) and Mr Afif Sarkis to act on their behalf in a building dispute before the Consumer Trader and Tenancy Tribunal (CTTT).

5 In the course of those proceedings, it became necessary for Afifco to obtain the services of a building consultant. The defendant (the plaintiff in the proceedings before her Honour) was such a consultant and its principal was Mr Anthony Grieve. Mr Grieve, on behalf of the defendant, was experienced in preparing forensic building reports and in giving evidence in building disputes.

6 On 30 June 2003 a letter on Eddy and Moloney letterhead signed by the plaintiff was sent to the defendant marked for the attention of Mr Grieve. The letter referred to a telephone conversation on 27 June 2003 and provided a brief background to the dispute before the CTTT. The letter concluded as follows:

“In those circumstances we would be grateful if a report could be prepared responding to the property inspection report of Worthington, Building Consultancy dated 4 June 2003. In addition we would be grateful if you could consider the contents of Mr Afif Sarkis’ statement dated 22 May 2003 and address any issues of importance. Once the respondent has filed the balance of his material we shall advise you whether any additional issues arise.
We would be grateful if you could contact Mr Moloney of our office to confirm the time of inspection.”

The letter was silent as to who was responsible for the payment of the defendant’s fees.

7 On 25 July 2003 an invoice was issued by the defendant to Eddy and Moloney in respect of services provided by the defendant up to that date.

8 In August 2003 the plaintiff left the employment of Eddy and Moloney and commenced practice as a sole practitioner under the name “Moloney Lawyers”. Afifco and Mr Sarkis remained clients of Eddy and Moloney.

9 Shortly thereafter, Afifco and Mr Sarkis became clients of the plaintiff in respect of the CTTT proceedings. That representation required the continued expert services of the defendant.

10 The plaintiff gave evidence that in early November 2003 he had a telephone conversation with Mr Grieve on behalf of the defendant. It was the plaintiff’s evidence that in the course of that conversation, he said to Mr Grieve:

“We will both have to manage our accounts carefully. From my perspective if my accounts are not paid I will not be able to continue acting. I have just set up in practice on my own for the first time, I cannot afford to have unpaid accounts. You will have to continue dealing with Tony Sarkis with respect to your accounts. I simply cannot afford to be responsible for your fees. Having said that I am happy to provide whatever assistance you require to ensure that your tax invoices are paid. …”

11 When that conversation was put to Mr Grieve in cross-examination, he agreed that he had had a number of conversations with the plaintiff but could not remember this specific conversation. He said that such an arrangement would have been contrary to his normal practice which was to hold the solicitors who had retained the defendant responsible for the payment of its fees.

12 On 12 November 2003 the plaintiff sent the following letter to the defendant:

“We refer to the above matter and advise that we have received instructions to act on behalf of the applicant herein.
We enclose herewith change of address card for your records.
We note that your outstanding account herein has now been paid. We apologise for the delay in the payment of that account. In the meantime we advise that the respondent has filed a cross-claim in these proceedings. The filing of the cross-claim will obviously affect your report in these proceedings. We now enclose herewith for inclusion in your brief …
We would be grateful if you would contact Mr Moloney of our office to discuss the completion of your report.”

13 It appears to have been common ground that there were no further communications between the plaintiff and Mr Grieve concerning the payment of the defendant’s invoices.

14 As the CTTT matter progressed, the defendant encountered difficulties in having its fees paid. It sought payment of those fees directly from Afifco and Mr Sarkis. In the hearing before her Honour there was a dispute between the plaintiff and the defendant as to whether the defendant’s invoices were addressed to the plaintiff or to Afifco. The defendant produced computer-generated invoices addressed to the plaintiff. The accuracy of those invoices was challenged on the basis that the addressee had been altered. Mr Sarkis gave evidence before her Honour that he remembered receiving invoices addressed to Afifco.

15 In due course Afifco went into liquidation. In the liquidation the defendant sought to be recorded as a debtor of Afifco. Mr Grieve in his evidence before her Honour agreed that he had been pursuing Mr Sarkis and Afifco for the payment of his fees.

16 At the time the matter came before her Honour the plaintiff had cross-claimed against Mr Sarkis in respect of the defendant’s claim. In the absence of any defence, default judgment had been entered in his favour against Mr Sarkis. Under cross-examination (T.64.14) the plaintiff agreed that the default judgment and the affidavit in support of it were inconsistent with the defence which the plaintiff was maintaining against the defendant.

17 Before her Honour, the defendant put its claim in two ways. Its primary claim was that as a matter of contract, relying upon the letters of 30 June 2003 and 12 November 2003, the plaintiff was responsible for the payment of its fees. As an alternative, in a somewhat obscure pleading, the defendant relied upon rule 32 of the Solicitors’ Rules. Rule 32 provided:

“A practitioner who deals with a third party on behalf of a client for the purpose of obtaining some service in respect of the client’s business, must inform the third party when the service is requested, that the practitioner will accept personal liability for payment of the fees to be charged for the service or if the practitioner is not to accept personal liability, the practitioner must inform the third party of the arrangements intended to be made for the payment of the fees.”

18 Reliance on that rule was pleaded in the defendant’s Amended Statement of Claim as follows:

“18 In the further alternative and again to the extent that there is no effective agreement, the defendant is liable to the plaintiff in tort in damages, by virtue of the following facts and circumstances.
19 At all material times the defendant knew of or ought to have known of his professional rules, including rule 32.
20 The relevant effect of the rule was that the defendant, when he dealt with the plaintiff on behalf of Afifco for the purpose of obtaining the plaintiff’s expert services, ought to have informed the plaintiff of any arrangement for payment of the plaintiff’s fees.
21 To the extent the defendant was intending not to accept personal liability of the fees, the defendant failed to do so.
22 Afifco is in liquidation and the plaintiff is unlikely to recover the value of its services from Afifco.
23 Had the defendant informed the plaintiff in accordance with rule 32, the plaintiff would not have suffered under the misapprehension that the defendant accepted liability for its fees and would not have been in the position it is now, namely that it is unlikely to recover the balance of its fees or alternatively a reasonable remuneration for its work.
24 In the premises and within the ambit of the principles discussed by the High Court in Perre & Ors v Apand Pty Limited (1999) 198 CLR 180, the plaintiff is in that class a person as to whom the defendant owed a duty such as to sustain an action for damages for negligence.”

19 When counsel for the defendant was asked to explain that pleading and the nature of the reliance placed upon rule 32, he advised the Court that what he was seeking to plead was a claim based on a negligent misstatement – the negligent misstatement being the failure by the plaintiff to advise the defendant in accordance with the requirements of rule 32.

20 Counsel for the defendant said that in submissions before her Honour, he had briefly raised a claim for damages based on breach of statute, i.e. rule 32. He accepted that such a claim had not been pleaded.

21 In his defence the plaintiff admitted that there had been an agreement between Eddy and Moloney and the defendant that the firm would be responsible for the defendant’s fees. He denied that there had ever been an agreement between him and the defendant to that effect. In that regard, he relied upon the conversation in early November 2003 in which he said that he had made it clear to the defendant that Afifco and Mr Sarkis were to be responsible for the payment of its fees.

22 The cross-examination of Mr Grieve and of the plaintiff and the submissions made to her Honour sought to rely upon subsequent conduct and documents to establish the nature of the agreement between the plaintiff and the defendant. The defendant’s primary position was that the letter of 12 November 2003 was inconsistent with the conversation which the plaintiff said that he had with Mr Grieve before that letter was sent. The plaintiff relied upon the actions taken by the defendant to recover its fees from Mr Sarkis and Afifco in 2004 and 2005 as establishing that Afifco and Mr Sarkis were responsible for the payment of its fees.

Her Honour’s judgment

23 Her Honour found that as of 30 June 2003 the plaintiff and Mr Eddy were in partnership. She based that finding on the letter of 30 June 2003. Her Honour found that the plaintiff had retained the services of the defendant as a principal of the firm Eddy and Moloney by that letter. Her Honour then referred to rule 32 of the Solicitors’ Rules and in particular the requirement to advise the third party of payment arrangements at the time when the service is requested from the third party. Her Honour noted that there was no evidence of any such advice having been provided, either before or at the time that the letter of 30 June 2003 was sent.

24 Her Honour found that rule 32 was not simply an ethical guideline but a rule of law requiring that legal practitioners act in a certain way. Her Honour found that it did not matter that the defendant had pursued Afifco for the payment of its fees because of the effect of rule 32. Implicitly her Honour seems to have found that unless disclosure of a payment arrangement as required by rule 32 was made by a solicitor to the third party, the solicitor would become liable to the third party for the payment of the fees.

25 Her Honour’s concluding remarks were as follows:

“Indeed having regard to the defendant’s position in these proceedings, as indicated in these remarks, the Court is of the view that his defence has been entirely untenable. Further, the Court has formed the view that he has been less than frank and forthright in the manner in which he has sought to continue these proceedings and having arrived to those aspects of the evidence before the Court the judgment is entered for the plaintiff in the amount sought …”

The appeal

26 The plaintiff made three complaints concerning her Honour’s judgment. They are:

(i) That it was not open to her Honour to find that the plaintiff had become personally liable to the defendant as a result of the agreement to retain the defendant’s services as evidenced by the letter of 30 June 2003.

(ii) That her Honour failed to give adequate or any reasons for holding that the defendant had a cause of action pursuant to rule 32 of the Solicitors’ Rules.

(iii) That her Honour failed to give any or any adequate reasons for reaching her decision.

27 I am of the opinion that there is force in all three complaints. The appeal must succeed and the matter will have to be referred back to the Local Court to be decided according to law.

28 It was not open to her Honour to find that the plaintiff was a partner in the firm of Eddy and Moloney at the time when the defendant was retained by the letter of 30 June 2003. Other than the name of the partnership on the letterhead, there was no evidence to support that proposition. The plaintiff was not cross-examined to that effect, nor were any submissions made by the defendant to that effect. All the evidence before her Honour was to the contrary.

29 Moreover, the emphasis which her Honour gave to the letter of 30 June 2003 made it clear that her Honour misunderstood the case that was being made on behalf of the defendant. It was not the defendant’s case that on 30 June 2003 a contract had been entered into between the plaintiff and the defendant which made the plaintiff personally liable for the defendant’s fees. The defendant’s case was that as a result of that letter, an agreement had been entered into between the firm Eddy and Moloney and the defendant to that effect. It was against that background that the letter of 12 November 2003 gained its importance. It was the defendant’s case that the letter of 12 November 2003 constituted the agreement between the plaintiff and the defendant that the defendant would perform services for the plaintiff on the same basis as it had previously agreed with Eddy and Moloney.

30 Her Honour’s failure to mention the letter of 12 November 2003 and its importance in the defendant’s case shows that her Honour misunderstood how the defendant’s case was being put.

31 Once the focus is upon the letter of 12 November 2003 (as it should have been) the importance of the conversation alleged by the plaintiff to have taken place in early November 2003 before that letter was sent becomes apparent. If the plaintiff were to be accepted when he said that such a conversation took place that would be a complete answer to the defendant’s primary case based on contract. I do not regard her Honour’s concluding remarks at [25] as constituting an adverse credit finding to the contrary. Those remarks were of a general kind and did not relate to this conversation.

32 Her Honour’s failure to mention that conversation and to reconcile it with the letter of 12 November 2003, together with her failure to mention that letter, constitute a failure to provide adequate reasons for her decision. Her Honour in fact failed to decide the very issue which the parties had put before her for decision, i.e. whether the letter of 12 November 2003 in its context constituted an agreement between the plaintiff and the defendant that the plaintiff would be personally liable for the defendant’s fees.

33 Even though an appeal from her Honour’s decision only exists as of right in point of law, there is still a requirement for adequate reasons to be given. Failure to do so of itself constitutes an error of law. This was made clear by McHugh JA in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 280-281 where his Honour said:

“Moreover, I agree with the statement by Mahoney JA in Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd (at 386) that the extent of the duty to give reasons is related “to the function to be served by the giving of reasons”. Thus more elaborate reasons are required where legislation gives a right of appeal against a decision than where no appeal lies. In the first class of case, unless the basis of the decision is properly articulated, the losing party may be effectively deprived of his right of appeal.
In a case where a right of appeal is given only in respect of a question of law, different considerations apply from the case where there is a full appeal. An ultimate finding of fact, which is not subject to appeal and which is in no way dependent upon the application of a legal standard, can be treated less
elaborately than an issue involving a question of law or mixed fact and law. If no right of appeal is given against findings of fact, a failure to state the basis of even a crucial finding of fact, if it involves no legal standard, will only
constitute an error of law if the failure can be characterised as a breach of the principle that justice must be seen to be done. If, for example, the only issue before a court is whether the plaintiff sustained injury by falling over, a simple finding that he fell or sustained injury would be enough, if the decision turned simply on the plaintiff's credibility. But, if, in addition to the issue of credibility, other matters were relied on as going to the probability or improbability of the plaintiff's case, such a simple finding would not be enough.
…
Accordingly, the present case is concerned with a finding of fact which involves no legal standard and is not subject to appeal. The issue, therefore, is whether the failure to explain the basis of the crucial finding of fact involves a breach of the principle that justice must not only be done but must be seen

to be done. If it was, that is itself an error of law because, as Asprey JA pointed out in Pettitt v Dunkley (at 382), the learned judge “has not properly fulfilled the function which the law calls upon a judicial person to exercise”. …”

34 It seems to me that her Honour erred in law in two respects on this issue. She made a finding of mixed fact and law (i.e. as to the parties to the agreement of 30 June 2003 and its terms) when there was no evidence to substantiate such a finding and she failed to decide the question which she was asked to decide. Implicit in that last criticism is the failure on the part of her Honour to engage in the fact finding exercise which was required in order to resolve that issue.

35 I have considerable doubts as to whether a breach of rule 32 of the Solicitors’ Rules gives rise to a cause of action. It could not give rise to an action in tort as was sought to be pleaded on behalf of the defendant in its Amended Statement of Claim. The effect which her Honour sought to give to rule 32 was that if a solicitor breached it, there would be implied into any agreement which that solicitor had with the third party a term that absent any agreement to the contrary the solicitor would be responsible for the payment of that third party’s fees.

36 There are a number of difficulties with such an interpretation. The first and most obvious is that the rule is not expressed in those terms and does not specify any penalty for breach.

37 Having interpreted the rule in that way, it was incumbent upon her Honour to provide some basis either in law or in fact for such an interpretation. Quite clearly the terms of the rule itself do not provide such an explanation.

38 Moreover, if her Honour’s interpretation of the rule were correct it would then become necessary for the rule to be applied not to the agreement of 30 June 2003 but to that of 12 November 2003. In those circumstances it was necessary for her Honour to resolve the question of whether the conversation asserted by the plaintiff to have taken place in early November did in fact take place. If it did take place in the terms in which the plaintiff asserted then that would provide a complete answer to any claim based on rule 32.

39 Her Honour did not perform that analysis nor did she engage in the fact finding essential to applying rule 32 in the way in which she found it should be applied. On this issue as well, those failures constituted a failure to provide adequate reasons which in turn amounts to an error of law entitling the plaintiff to succeed in this appeal.

Costs

40 This appeal was fully argued. The plaintiff has succeeded. I can see no reason why the plaintiff should not have his costs of the appeal. It is always regrettable when a matter has to go back for a retrial, but in this case because questions of credit are involved, there is no alternative. It seems to me that the costs of the hearing before her Honour should be determined by the outcome of the rehearing.

Orders

41 I make the following orders:

(i) To the extent necessary, I grant leave to the plaintiff pursuant to s 74(1) of the Local Courts Act 1982 to proceed with this appeal.

(ii) The appeal is allowed.

(iii) The matter is to be remitted to the Local Court to be decided according to law.

(iv) The costs of the hearing before her Honour are to follow the outcome of the rehearing.

(v) The defendant is pay the plaintiff’s costs of the appeal.

(vi) The defendant is to have a certificate under s 6(1)(a) of the Suitors’ Fund Act 1951 if otherwise qualified.

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