Orr v Grogan and 2 Ors

[1999] NSWSC 665

Reported Decision: (1999) NSW ConvR 55-931

New South Wales

Supreme Court

CITATION:	Orr v Grogan & 2 Ors [1999] NSWSC 665
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	10846/97
HEARING DATE(S):	24, 25, 26 June 1999
JUDGMENT DATE:	6 July 1999
PARTIES :	Leonard Cornelius Orr v Dennis Patrick Grogan (1st Defendant) Lewis James Webb (2nd Defendant) Margaret Leigh Linden (3rd Defendant)
JUDGMENT OF:	Sperling J

COUNSEL :	For Plaintiff: I M Wales SC For 1st, 2nd & 3rd defendants: P M Morris
SOLICITORS:	For Plaintiff: Stuart & Mills For 1st, 2nd & 3rd Defendants: Turtons
CATCHWORDS:	LEGAL PRACTITIONERS - solicitor's liability to account pursuant to an irrevocable authority despite new instructions; IRREVOCABLE AUTHORITY - conditions for liability to account pursuant to same - promise to account, express or implied.
ACTS CITED:	Supreme Court Act 1970, s 94
CASES CITED:	Redglove Holdings Pty Ltd v Kindy 4 Kids (Australia) Pty Ltd (Brownie J, 5 December 1994, unreported)
DECISION:	Paragraph 83

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

SPERLING J

Tuesday, 6 July 1999

10846/97 Leonard Cornelius Orr v Dennis Patrick Grogan & Ors

JUDGMENT
HIS HONOUR:

1    This is a money claim made by the plaintiff, Mr L C Orr, solicitor, against the defendants, Mr D P Grogan, Mr L J Webb and Ms M L Linden, solicitors. The first and second defendants were at relevant times the principals of the firm Grogan & Webb, and the third defendant was employed by them.

2    In the following narrative of events, I will indicate where a contentious issue arises. Otherwise, my account of the facts was common ground or not seriously in issue.

3    Although there are some serious differences between the versions of events given by Mr Orr and Ms Linden in these proceedings, I think both were doing their honest best to be accurate and reliable.

4    In 1989, Mr J E Nove retained Mr Orr to act for him in matrimonial proceedings. An application was made to the Family Court by Mr Nove for a property settlement. A cross application was made by Mr Nove’s wife. The proceedings were heard by his Honour Justice P J Moss in July 1990. Mr P I Rose of Queen’s Counsel and Mr P M Connor of counsel appeared for Mr Nove. Mr R G Lethbridge of counsel appeared for Mrs Nove. At the conclusion of the hearing, his Honour reserved his decision.

5    The matter was listed for judgment on 14 September 1990. A matter seriously in contention had been the value of a farm property at Tyagarah. Prior to 14 September 1990, a price for the sale of that property had been negotiated significantly higher than had previously been envisaged (although contracts were not exchanged for the sale of the two lots comprising the Tyagarah property until 17 and 30 October 1990). Accordingly, judgment was deferred. The hearing was resumed on 12 November 1990 to take into account the price secured for the Tyagarah property. Judgment was given on 16 November 1990.

6    In relation to the sale of the Tyagarah property, Mr Nove retained Ms Linden to act for him. Mr Orr and Ms Linden maintained contact in relation to the sale. Their relationship was cordial and co-operative.

7    On 9 October 1990 Mr Orr wrote to Mr Nove as follows:
“As you are aware the writer and Counsel have carried the conduct of this case on a speculative basis and we would be pleased if you would give consideration to payment of our outstanding account from the proceeds of the sale of the Tyagarah farm.
If you regard this as reasonable would you please sign the enclosed authority.”
8    The authority signed by Mr Nove and dated 10 October 1990 was in the following terms:
“AUTHORITY


Messrs Grogan & Co.

Solicitors

“I JOLYON EMANUEL NOVE hereby irrevocably authorise and direct you to pay to my solicitors Messrs. Orr & Co., from the proceeds of sale of the farm property at Tyagarah their costs and disbursements.”
9    The authority was forwarded to Messrs Grogan and Webb by Mr Orr under cover of a letter dated 12 October 1990 which read as follows:
“We enclose an authority to you for payment of our professional costs and disbursements from the proceeds of sale of the Tyagarah farm. We will advise you of the outstanding amount in due course.”

10    Ms Linden read the authority and filed it. She had no conversation with Mr Orr about the authority at that stage. She intended, at that stage, to act on the authority. Ms Linden knew of the Family Court proceedings and she knew that all of the properties of the parties to those proceedings were “in the melting pot”. That, to her knowledge, would have included the Tyagarah property.

11    It was submitted on behalf of the defendants that the authority should be construed as relating only to costs and disbursements to date. I disagree. The terminology of the authority was not so limited. The context was also against such a restrictive construction. The possibility was that further work would have to be done while ever judgment was reserved. More particularly, the need for further consideration having to be given to the matter, in view of the price negotiated for the Tyagarah property, was already apparent by 9 October 1990. There was no logical reason for restricting the authority to costs incurred to date when the prospect of further costs being incurred was not only a possibility but an actuality.

12    As appears from the judgment of his Honour Justice Moss, real estate owned at the date of separation consisted of the former matrimonial home (which was in the name of Mrs Nove), an investment property at Trouve Street, Lane Cove (which was in the name of Mr Nove), and a farm property at Tyagarah in which Mr Nove had a 60% benefit interest. (The other 40% was beneficially owned by members of Mr Nove’s family and children of the marriage.) Mr and Mrs Nove were also each in possession of personalty. In addition, Mr Nove had, since the separation, acquired a further property, at Linley Point, which was heavily mortgaged and which had proved to be a poor investment.

13    His Honour treated the Linley Point investment as being exclusively Mr Nove’s responsibility. He put it out of account. The settlement under the judgment was that Mrs Nove was to keep the matrimonial home; Mr Nove was to keep the Trouve Street property and was to take the nett proceeds of sale of the farm property at Tyagarah; each party was to retain the personalty which they respectively had in their possession; and Mrs Nove was to make a payment of $64,000 to Mr Nove. That payment was a balancing item which produced a distribution of property (not taking the Linley Point property into account) of approximately 53% in favour of Mrs Nove and approximately 47% in favour of Mr Nove.

14    On 15 November 1990, Mr Orr sent Mr Nove a statement of account, referring to earlier accounts and payments on account for $68,691. (In this judgment, I have ignored cents for all figures.)

15    The $64,000 payable by Mrs Nove under the property settlement was received by Mr Orr on 17 December 1990. By arrangement with Mr Nove, one-half of this sum, $32,000, was paid to Mr Nove. The balance was applied to Mr Orr’s costs and disbursements, in particular, approximately $11,000 in payment for counsel’s fees and approximately $21,000 towards Mr Orr’s profit costs.

16    On 21 December 1990, Mr Orr wrote to Ms Linden as follows:
“We refer to the irrevocable authority previously forwarded to you with regard to payment of our outstanding costs and disbursements from the proceeds of sale of the Tyagarah land and advise that the present outstanding debt by Mr Nove to this firm is $43,966.25. We would be pleased to receive your cheque accordingly.
We have today forwarded a copy of this letter to Mr Nove.”

Ms Linden read the letter and filed it. She had no conversation with Mr Orr about the letter at that stage.


17    Mr Nove was dissatisfied with the result of the Family Court proceedings. He instructed Mr Orr to institute an appeal. On 29 January 1991, he withdrew his instructions from Mr Orr.

18    On 6 February 1991, Mr Orr sent a further statement of account to Mr Nove. The costs and disbursements included the costs of the resumed hearing before his Honour Justice Moss. The amount outstanding, after credit for the $32,000, was $54,472.

19    On the same date, Mr Orr wrote to Ms Linden as follows:
“Please note that we no longer act for Mr Nove. We forwarded to Mr Nove today an updated memorandum of professional costs and disbursements and statement of account and advised him that the final balance owing to this firm is $54,472.64.
We have requested Mr Nove to confirm this with you so that payment in that sum may be made to us from the proceeds of sale of the Tyagarah farm properties in accordance with the irrevocable authority previously forwarded to you.”

20    On 11 February 1991, Mr Nove informed Ms Linden that he was not happy with Mr Orr’s services, that he did not way to pay him, and that he did not want Mr Orr to be paid out of the proceeds of the sale of the Tyagarah property.

21    On 12 February 1991, Mr Nove wrote to Mr Orr. He said he disputed the account. He alleged negligence. He went on to say:
“Your attention is drawn to my understanding that we jointly agreed to revoke the requirement that the payment of your fees be made from the farm sale. This was done at the time of my prior payment to you of $32,000.
If indeed this payment of $32,000 is held by you not to be part of us jointly revoking the requirement then you are required within 14 days to return to me the $32,000 that you held in your trust account for me.”
A copy of the letter was sent by Mr Nove to Ms Linden.


22    On 21 February 1991, Ms Linden consulted Ms Shirvington of the Law Society of New South Wales. She explained the situation to Ms Shirvington, who advised that Ms Linden was obliged to implement the client’s fresh instructions, and that Ms Linden had no obligation to Mr Orr.

23    On 21 February 1991, Ms Linden spoke to Mr Orr. This was their first conversation about Mr Orr’s claim on the proceeds of sale of the Tyagarah property. Ms Linden informed Mr Orr of the advice she had received and of her intention to follow that advice. Mr Orr said that, in that conversation, Ms Linden also made it clear to him that her sympathies were with him, and that she would see he was paid if she could. I accept that. But I also find that Ms Linden believed she had no alternative but to implement Mr Nove’s instructions to her, and that is what she told Mr Orr.

24    On the same date, 21 February 1991, Mr Orr spoke to Ms Shirvington. According to Mr Orr’s file note, Ms Shirvington said that the irrevocable authority was “just an authority unless it’s binding in a contractual sense”. The file note went on to record “If it’s in trust, he can change his mind”. Mr Orr took Ms Shirvington’s advice that the client could change his mind to be qualified by any contractual element in the authority.

25    Mr Orr sought advice from Mr Rose QC about the situation. He advised that the Law Society’s position was wrong and that it was better to resolve the matter amicably rather than by court proceedings. Mr Orr said he therefore refrained from seeking an injunction.

26    On 27 February 1991 Mr Nove wrote to Mr Orr setting out his complaints in some detail. He concluded the letter as follows:
“Following my letter to you of 12th February 1991 14 days has now expired since that letter and I determine from that that the $32,000 held by you is part of us jointly revoking the requirement that your fees be paid from the sale of the farm. You are now required to pay $8,775.00 to Mr Peter Rose QC out of my $32,000 trust money.”
27    On 4 March 1991 Mr Nove wrote to Ms Linden as follows:
“I refer to my irrevocable authority of 10/10/90 directing payment of costs to Orr & Co. from the proceeds of sale of my properties at Tyagarah.
I hereby revoke that authority and direct you to make no payment of cost to Orr and Co. until further direction.”

28    On 7 March 1991, Mr Orr wrote to Mr Nove. Negligence was denied. Release of the irrevocable authority was denied. It was stated that the $32,000 had been paid simply on account and not otherwise. Release of a lien over the file was refused pending payment of the balance of Mr Orr’s account.

29    On 8 March 1991, Mr Orr wrote to Ms Shirvington at the Law Society. He asked for an urgent ruling by the Council of the Law Society.

30    On 8 March 1991, Mr Orr wrote to Ms Linden, enclosing a copy of his letter to the Ms Shirvington and asking for confirmation that the outstanding funds would be retained in her trust account pending a ruling by the Council of the Law Society.

31    On 11 March 1991 Ms Linden wrote to Mr Orr as follows:
“We refer to your letter of the 8th March, 1991 and advise that our client’s instructions are unchanged in that we are directed not to hold any funds on your behalf from the settlement monies. As this accords with the current advice we have received from the Law Society we must adhere to our client’s instructions.”

32    On 12 March 1991, Mr Orr wrote to Ms Linden asking her to reconsider her position and advancing arguments in his cause, including that Ms Shirvington had expressed reservations about her view when speaking earlier to Mr Orr.

33    On 13 March 1991, Mr Orr wrote to the President of the Law Society advancing arguments in support of the ruling that had been sought.

34    Mr Orr asserts that, on 13 March 1991, he spoke to Ms Linden, advising her of his further representations to the Law Society, and that she said to him words to the effect, “I will get a second opinion before releasing the funds”. Mr Orr has a file note dated 13 March 1991 relating to a telephone conversation with Ms Linden. It reads as follows:
“She will get second opinion before releasing funds.”
35    Ms Linden’s account of that conversation is as follows.
“He said: I’ve obtained advice from a QC and he is clearly of the opinion that you can’t ignore the irrevocable authority.
I said: Will you send me a copy of that advice?
He said: No, I don’t want to do that. You should get an opinion from a silk.
I said: We’re not going to pay for that. Why don’t you give me a copy of your QC’s opinion.
He said: No. I’ve written again to the Law Society. I would like you to reconsider releasing the funds to Nove or at least hold the money in trust until the Law Society hands down a ruling.
I said: I can’t. That’s what Jolyon has instructed me to do. I wish I didn’t have to do this but in view of Jolyon’s (Mr Nove’s) instructions and the advice from Virginia Shirvington, I have to.
He said: Would you at least write to the Law Society and ask for written confirmation of its earlier advice?
I said: Yes, OK. But until I get different advice, I have to follow Jolyon’s instructions.”

36    Mr Orr denied that there was any conversation about providing a copy of counsel’s opinion. He said there was no written opinion. The advice had been received in conference. Nothing turns on that.

37    Mr Orr did not admit the balance of the conversation as recounted by Ms Linden. Mr Orr also denied that Ms Linden said that she would have to follow the client’s instructions until she got different advice.

38    It is at least clear that Mr Orr anticipated that Ms Linden would direct her request for further advice to the Law Society rather than elsewhere. The following is an extract from Mr Orr’s evidence:
“Q. You, at the time you made this call, had from her a statement in writing that she was going to act in accordance with your instructions. That statement was made on 11 March; is that right?
A. I said a bit more than that Mr Morris. In accordance with the current instructions and with the current advice from the Law Society she and I discussed the hope that the problem could be resolved by the Law Society coming up with an opinion that was different from the preliminary verbal opinion on the telephone that was contrary to counsel’s advice.
Q. It was clear until she got the clearance she felt obliged to release the money, until she got some other opinion?
A. Until she got some other opinion, yes.”

39    But Mr Orr’s evidence went further than that. He asserted that Ms Linden expressly undertook to withhold funds from Mr Nove pursuant to the authority until such further advice was to hand, and then not to disburse such funds without notice to him if the further advice was adverse.

40    Mr Orr’s evidence on this topic was as follows.
“Q. What I have suggested to you as recorded opinion is, in fact, written confirmation that what she said was, I’ll get written confirmation?
A. No. Mr Morris, what I think happened and it is partly reconstructed, I think I faxed this letter to her, spoke to her and said, ‘Will you please get a second opinion before releasing the funds?’ She said, ‘Yes.” I think that is the way it happened.”

And in the same vein:

“Q. Well, if I can take you back to your second statement first and to the passage that you do not deny, although you cannot recall. Is it your view that what you might have said was, looking at the bottom of page 2, ‘Would you at [least] write to the Law Society and ask for a second opinion’?
A. I am almost certain that I said because I got the file note, ‘Would you get a second opinion before releasing the funds?’ That is what I said. That was in accordance with all of this conduct between us and she was quite agreeable to that.”

And again:

“Q. What you said, is it, that on the 13th despite her stating this position in February and in March (that she would implement Mr Nove’s instructions), you talked her out of it?
A. Yes.
Q. Is that what you say?
A. Yes.”

41    I am not persuaded that Ms Linden gave the undertaking asserted by Mr Orr. The whole point of Ms Linden’s dilemma was that she understood, on the advice she had received, to be that she was bound to act on the client’s latest instructions irrespective of the terms of the authority. How could she undertake not to do so until further advice or confirmatory advice had been received?

42    By the same token, there is no basis for any such undertaking arising by implication from Ms Linden’s agreement to ask the Law Society for further advice.

43    There is then no basis either for the asserted implication that Ms Linden would not disburse funds covered by the authority without notice to Mr Orr if the Law Society’s further advice were adverse.

44    I accept that Mr Orr believed that Ms Linden would withhold sufficient funds to cover his costs and disbursements until she had received further advice from the Law Society, and would then not disburse the funds covering his claim without notice to him if the advice was adverse. But, in my view that belief was not soundly based, for the reasons I have given.

45    I pick up the narrative from the conversation between Mr Orr and Ms Linden on 13 March 1991. On the same date, Ms Linden wrote to Ms Shirvington recording that her advice had been that Ms Linden was obliged to follow the client’s latest instructions which were not to pay the monies to Mr Orr. She concluded the letter as follows:
“We have since had correspondence from Orr and Co., a copy of which is enclosed. We have also been requested by Len Orr of Orr and Co. to seek written confirmation from you of your advice of the 21st February.”

46    On 14 March 1991, the Law Society wrote to Mr Orr, acknowledging receipt of his letter of 8 March 1991 and advising that the matter had been referred to the Society’s General Practice Rulings Committee.

47    Ms Linden says that, in mid-March 1991, Mr Nove instructed her not to tell Mr Orr when the Tyagarah sale settled, and that she told Mr Nove she accepted those instructions.

48    The sale of one lot comprising part of the Tyagarah property was completed on 22 March 1991. The nett proceeds in relation to Mr Nove’s 60% interest were paid to Mr Nove by bank cheque supplied by the purchaser on settlement. Mr Nove signed a receipt for the bank cheque on 25 March 1991, presumably when it was delivered to him by Ms Linden.

49    On 25 March 1991, Mr Orr says he spoke to Ms Linden and that she said, “We settled Lot 5 on Friday. We are pushing to settle the other Lot this week.” Mr Orr has a file note of the same date: “Settled lot 5 Fri. Pushing to settle other one this week.” Ms Linden denies that there was any such conversation with her. It was put to Mr Orr that the conversation might have been with the estate agent or with the purchaser’s solicitors. Mr Orr said that was highly unlikely.

50    It is unnecessary to resolve this conflict of recollection. Possibly, Mr Orr was informed of the sale by someone else. Possibly, Ms Linden was not instructed to keep settlement of the sale to herself until after the sale of the first lot had been settled. One way or the other, Mr Orr knew the sale of part of the property had been completed and that completion of the remaining lot was imminent.

51    Mr Orr says he made no complaint about the funds being disbursed from the sale of the first lot because he knew there were sufficient funds coming from the sale of the second lot.

52    On 26 March 1991, Mr Nove’s new solicitors, Messrs. Carroll and Knudsen wrote to Mr Orr, referring to the dispute over costs and foreshadowing a compromise proposal to facilitate release of Mr Nove’s papers in exchange for satisfactory security for costs as agreed or taxed. This does not appear to have had any bearing on the dealings between Mr Orr and Ms Linden. Further correspondence with Messrs Carroll and Knudsen ensued which, likewise, does not appear to have a bearing on the issues in these proceedings.

53    The sale of the second lot comprising the balance of the Tyagarah property was completed on 28 March 1991. The nett proceeds in relation to Mr Nove’s interest were paid over in the same manner as in the case of the first lot. Mr Nove again signed a receipt for the bank cheque, although on this occasion the receipt is not dated.

54    I find that the bank cheques were handed over to Ms Linden (or her representative) on settlement and subsequently delivered to Mr Nove on each occasion.

55    As at 28 March 1991, Ms Linden had received no reply to her letter to the Law Society of 13 March 1991. On 3 April 1991, she received a letter from the Law Society dated 26 March 1991 advising that the matter had been referred to the General Practice Rulings Committee. By then the sale was completed.

56    On 12 April 1991, Mr Orr sent to Ms Linden a copy of the letter of 14 March 1991 received from the Law Society.

57    On 12 April 1991, Mr Orr spoke to Ms Linden. There is no material dispute about the terms of the conversation. According to Mr Orr, Ms Linden said that the Law Society had not replied to her letter (true, as at completion of the sale, so far as Ms Linden was then aware), that she had spoken to people around the office and paid out. A conversation in those terms is confirmed by a file note made by Mr Orr on 12 April 1991. Ms Linden’s account of the conversation is as follows.
“He said: I understand Tyagarah’s settled and Nove’s got the proceeds.
I said: Yes. I was bound by my client’s instructions. Virginia Shirvington clearly told me that I had to release the funds and I did not get a reply to my letter from the Law Society to advise me otherwise. I discussed it with my partners and we all agreed that the funds should be released. I had no choice but to release the funds. I told you that this is what we would have to do.”

58    Mr Orr said in his evidence that, if Ms Linden had informed him that she intended to release the funds “prior to obtaining a second opinion from the Law Society”, he would have sought a Supreme Court injunction restraining her from releasing the funds.

59    On 7 June 1991, Mr Nove commenced proceedings to obtain Mr Orr’s file in relation to the Family Court proceedings. On 15 August 1991, the application was dismissed.

60    On 28 November 1991, a certificate of taxation issued in relation to the Family Court appeal proceedings in the sum of $7,711. On 16 April 1992, a certificate of taxation issued in the Family Court trial proceedings for $90,144, the balance then owing being $20,300.

61    On 2 June 1992, Mr Nove was made bankrupt on his own petition. Mr Orr received a dividend of $845.

62    Mr Orr spoke to Ms Linden on 18 March 1997. He has a handwritten file note of speaking to Ms Linden on that date. There is also a memorandum relating to that conversation, which Mr Orr says he dictated immediately following the conversation. According to the memorandum, Mr Orr referred to the case of Twigg v Keady (1996) FLC 92-712 as providing a basis for his claim on the proceeds of the sale of the Tyagarah property. The memorandum continues as follows:
“I said: You released the funds without having let me know.
She said: I agonised over it, I was in a terrible position, I felt you should be paid and yet I was told by the client to not pay it. I wrote to the Law Society, I did not want to pay it out, my problem was I was told by the Law Society that I had to pay it out. I think that I did all that I could.
I said: The problem was that you said you were going to get a second opinion from the Law Society and then you said that you asked around the office and just paid it out without telling me.
She said: My instructions were not to tell you. I hoped you would get a fast injunction, as a fellow practitioner I wanted you to be paid.”

Ms Linden gives a similar account of this conversation.

63    At all relevant times, Ms Linden was aware that the Tyagarah property was part of the property the subject of the Family Court proceedings. In her witness statement, Ms Linden said:
“During 1990 and 1991, I acted on the client’s instructions in relation to the sale and transfer of various properties owned by the client as a result of family law proceedings between the client and his ex-wife. During that time, I was aware that the Plaintiff was acting for the client in relation to Family Court proceedings. I had a number of telephone conversations with the Plaintiff in relation to the sale of the properties pursuant to the Family Court orders and in relation to subpoenas requiring the production of those files.”

I have referred to her evidence that she knew when she received the irrevocable authority that all the real estate owned by Mr Nove and his wife were “in the melting pot”, which would have included the Tyagarah property. Furthermore, one stage, she supplied a chronology relating to the sale of the Tyagarah property for the purpose of the Family Court proceedings. The following is part of her oral evidence bearing on the same topic.

“Q. I think you said earlier that you were certainly aware that the farm or the proceeds of sale of the farm were part of the property of the parties which were the subject of the Family Court proceedings?
A. That’s right.
Q. And at some point you became aware that the effect of the judgment was that amongst the assets which Mr Nove would keep were the proceeds of sale of the farm?
A. That was - yes, that is what I believed he was going to keep that.
Q. Can I suggest that you must have known that because you were certainly when the judgment was given made aware that judgment had been given by someone?
A. I assume so. I do not have a particular recollection.
Q. There is hardly any doubt that someone, such as Mr Nove or Mr Orr or Mr Paltos told you that judgment had been given?
A. Judgment had been given.
Q. You understood that it was within the power of the Family Court judge, Justice Moss, to deal with the property or the proceeds of sale as he thought appropriate?
A. Yes.
Q. And that fact might impinge on what you had to do with the proceeds of sale?
A. I think I assumed at all times that Mr Nove should deal with that property and nobody had told me otherwise. Jolyon hadn’t told me otherwise, my client, and I assume somebody would stop me if there was a problem with it.
Q. In other words, you acted upon the assumption which you now know to be correct, that the terms of the judgment were such as not to impede Mr Orr in dealing with the farm?
A. Mr Nove.
Q. I’m sorry, Mr Nove, in dealing with the farm?
A. That’s right, yes.”

64    I find that, when proceeds of sale of the Tyagarah property were disbursed, Ms Linden was aware the property had fallen to Mr Nove under the Family Court judgment of 16 November 1990.

65    Mr Orr asserts that, in the events that have occurred, he has lost the sum of $27,166, being $28,011 pursuant to the taxation certificates less the bankruptcy dividend. He also asserts consequential loss, being interest on his bank overdraft, in the sum of $12,304.

66    The salient findings are as follows:


(a) Notice of the irrevocable authority was given by Mr Orr to Ms Linden on 12 October 1990.

(b) Ms Linden was aware that the authority related to costs and disbursements in Family Court proceedings in which the Tyagarah property was, as she became aware, awarded to Mr Nove (as to his 60% interest).

(c) The authority related to costs and disbursements in the Family Court proceedings incurred to date and prospective.

(d) Mr Orr notified Ms Linden of the amount of such unpaid costs and disbursements on 15 November 1990, (as varied) on 21 December 1990, and (as further varied) on 6 February 1991.

(e) Mr Nove withdrew his instructions to Mr Orr on 29 January 1991.

(f) On 11 February 1991, Mr Nove told Ms Linden he did not want Mr Orr to be paid anything out of the proceeds of the sale of the Tyagarah property. On 4 March 1991, Mr Nove gave formal instructions to Ms Linden accordingly.

(g) On 21 February 1991, Ms Linden was advised by Ms Shirvington that she was obliged to implement Mr Nove’s new instructions. That day, Ms Linden informed Mr Orr accordingly.

(h) On 8 March 1991, Mr Orr asked for Ms Linden’s confirmation that she would retain funds for his outstanding costs and disbursements pending a ruling by the Law Society, to whom Mr Orr had written requesting such a ruling.

(i) On 11 March 1991, Ms Linden told Mr Orr she could not.

(j) On 13 March 1991, Ms Linden agreed to request written confirmation by the Law Society of Ms Shirvington’s earlier advice, but stated that without different advice she would have to implement Mr Nove’s instructions.

(k) There was no undertaking or the like by Ms Linden that she would hold funds for Mr Orr pending further advice by the Law Society or that she would not disburse such funds without notice to Mr Orr.

(l) On 13 March 1991, Ms Linden sought written confirmation of the earlier advice. No response had been received by her before the sale of the Tyagarah was completed on 22 and 28 March 1991, and then (on 3 April 1991) advising only that the matter had been referred to a Committee.

(m) On 22 and 28 March 1991, the nett proceeds of sale of the Tyagarah property (as to Mr Nove’s 60% interest) were paid by bank cheques, supplied by the purchaser on settlement, drawn in favour of Mr Nove.

67    Mr Orr’s claim was put on several grounds. One was in reliance upon Article 114(3) in Bowstead and Reynolds on Agency (16th Ed, 1996).
“Where an agent is directed or authorised by his principal to pay to a third party money out of a fund existing or accruing in his hands to the use of the principal, and he expressly or impliedly promises such third party to pay him, or to receive or hold such money on his behalf or for his use, he is personally liable to pay such third party, or to receive or hold such money on his behalf or for his use, as the case may be, even if he has had fresh instructions from the principal not to pay such third party.”
68    The basis in precedent for this statement of principle is recorded as follows in Bowstead (paragraph 9-107):
“A large group of mainly nineteenth-century cases establishes that where an agent holds a fund for his principal and is directed by that principal to pay it to a third party, and notifies the third party that he is willing to do so, he becomes liable to the third party, and the principal’s authority becomes irrevocable.”

69    The formulation of principle dates from the second edition of Bowstead. It is too solidly entrenched to entertain disturbing it at my level in the judicial hierarchy.

70    The statement of principles applies by its terms to a fund “accruing” in the hands of the agent. It is, therefore, of no moment that, in the present case, the proceeds of sale of the Tyagarah property was not in the defendants’ hands at the time the authority was executed or when the authority came to Ms Linden’s notice.

71    Nor does it matter that the proceeds of sale (in so far as Mr Nove had an interest in them) were not paid into an account under the defendants’ control. Ms Linden had de facto control of the funds to be retained. She had the capacity to refuse to accept instructions for the payment of the whole of the nett proceeds of sale by bank cheques drawn in favour of Mr Nove; and she had the capacity to request that part of the nett proceeds of sale be paid into her firm’s trust account. In the events that occurred, she had obtained possession of the bank cheques payable in favour of Mr Nove on settlement; and she had the capacity to refuse to deliver the bank cheques to him, otherwise than in exchange for the funds to be deducted and retained under the authority.

72    What of the element in the Bowstead principle that the agent has expressly or impliedly promised the third party to account to him? In the present case there was no express promise, nor even an express acknowledgment of the receipt of the authority. Did silence amount to an implied promise within the meaning of the statement of principle in Bowstead?

73    The statement of principle in Bowstead was applied by Brownie J in Redglove Holdings Pty Ltd v Kindy 4 Kids (Australia) Pty Ltd (5 December 1994, unreported). In that case, the party in the role of agent, a Mr Licardy, wrote to the beneficiary before irrevocable authorities came into existence.
“We confirm that on 29th June, 1994 Agreements for Sale with respect to the abovementioned business were exchanged, settlement of which is expected to take place within the next fourteen (14) days.
On settlement we are instructed by our client that your commission in the sum of Thirty Thousand Dollars ($30,000) will be paid from the proceeds of sale.”

After the irrevocable authorities were delivered to him, Mr Licardy said to the beneficiary, “no worries, you’ll be fixed up”.


74    Pertinently, Brownie J held that the letter was a sufficient “promise” without the subsequent oral statement. So far as its express terms were concerned, the letter acknowledged instructions to implement the foreshadowed authorities. That was construed by Brownie J as giving rise to an implied promise to do so.

75    The statement of principle in Bowstead is one developed as a matter of commercial practicality, designed to give effect to a commercial commitment. The function of the “promise” is that of an assurance to the beneficiary of the authority that the principal’s commitment will be implemented. The beneficiary of the commitment is then relieved of the commercial necessity to take further steps to protect his interests, for example, by enforcing the commitment by injunction (if available), or by obtaining other security or by pressing for earlier payment. Conduct which conveys such an assurance of implementation should be sufficient to satisfy the element of promise, express or implied.

76    That, it seems to me is the rationale for Brownie J’s determination that a statement of instructions to implement was an implied promise to implement within the meaning of the Bowstead statement of principle. It amounted to an assurance to implement.

77    In the present case, Ms Linden’s response to receipt of the authority was silence. The authority was sent by Mr Orr to the defendants on 12 October 1990. Mr Orr’s claim under the authority varied from time to time with changes of circumstances, including payment on account by Mr Nove and further work being done. The balance of costs and disbursements asserted by Mr Orr to be payable was notified by him to Ms Linden on 15 November 1990, 21 December 1990 and 6 February 1991. There was no response by Ms Linden to any of these communications. (That is not said in criticism. I am not suggesting that a response was required.)

78    By 6 February 1991, if not before, the absence of any suggestion by Ms Linden that she did not intend to implement the authority constituted an implied assurance that she did. A solicitor in Mr Orr’s position would have construed her silence in that way, as Mr Orr did. A reasonable solicitor in Ms Linden’s position would have expected that to be the reaction. There is no suggestion that Ms Linden herself did not expect it to be the reaction.

79    Under the Bowstead principle, once such an assurance was given the defendants were bound by the instrument to account to Mr Orr.

80    Does it matter that the authority did not specify an amount to be held? I think not, in the circumstances of this case. The context made it clear that the costs and disbursements referred to in the authority were such costs and disbursements as were payable and might become payable by Mr Nove to Mr Orr in relation to the Family Court proceedings. That carried the implication of “reasonably payable”. It also carried the implication that any amount reasonably claimed to be held on account of costs and disbursements, pending taxation, should be deducted from the proceeds of sale of the Tyagarah property and held on account. There was no objection to the quantum of the claim made from time to time by Mr Orr. That was an implied admission that the amount claimed from time to time was reasonable as an amount to be held on account for payment to Mr Orr if there was to be no taxation of costs or to be held pending any such taxation of costs.

81    No question arises as to the quantification of damages. The liability is not a liability in damages.

82    No question of laches arises, the claim not being one for equitable relief.

83 The balance of taxed costs payable by Mr Nove was, ultimately, $27,116. Mr Orr is entitled to judgment in that amount plus interest. A case has not been made for interest otherwise than pursuant to s 94 of the Supreme Court Act 1970 .

84    Tentatively, it does not appear to me that Ms Linden, as distinct from the first and second defendants, is liable under this approach. The point has not been argued. If necessary, it can be argued.

85    In view of my decision under the first of the plaintiff’s approaches, it is unnecessary to determine the other grounds on which the plaintiff puts his case. Were there more money involved, I would give consideration to doing so, but further expenditure of judicial time is not warranted having regard to the amount involved.
86    The parties should bring in short minutes of order to implement this judgment.
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Last Modified: 07/08/1999