Ott v Dichiera - [2005] SADC 51

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
OTT v DICHIERA
Judgment of Her Honour Judge Cole
25 May 2005
DAMAGES
Assessment of Damages - action in negligence, breach of contract and breach of Fair Trading Act 1987 against accountant.
Fair Trading Act 1987, referred to.
Brown v Southport Motors (1982) ATPR 40-306; Marks v GIO Australia [1998] HCA 69; 158 ALR 333, considered.

OTT v DICHIERA
[2005] SADC 51
Judge Cole
Civil

This is an assessment of damages. A judgment by default was entered against the defendant on 8 March 2004. The defendant did not appear and took no part in the hearing before me.
The defendant was engaged in 1997 to act as the accountant for the plaintiff, his wife and a number of entities controlled by the plaintiff. The plaintiff acted as agent for all of those entities and for Mrs Ott. The entities were Williams Mining & Industrial Sales Pty Ltd, BES Unit Trust, Building Equipment Services Pty Ltd (former name Wels Pty Ltd) and Ott Unit Trust.
In relation to the 1996/97, 1997/98, 1998/99, 1999/2000, 2000/2001 and 2001/2002 financial years, the defendant led the plaintiff to believe that he had undertaken all necessary work in relation to the plaintiff, Mrs Ott and the entities controlled by Mr Ott to meet the requirements of the taxation system together with ordinary business accounting requirements. However, Mr Ott discovered shortly prior to November 2002 that the audit of the Ott Superannuation Fund had not been undertaken. This discovery led to a discussion between Mr and Mrs Ott and the defendant, in the course of which other deficiencies in the work entrusted to the defendant became apparent.
In November 2002, Mr Ott engaged Mr Bulmer, an accountant, to undertake the work necessary to bring the accounting and taxation requirements of Mr and Mrs Ott and the abovenamed entities up to date. That work was undertaken.
The plaintiff issued proceedings against the defendant.
The plaintiff alleged that the defendant had breached his contract to provide financial services in that various financial statements, tax returns, business activity statements and the like had either not been prepared or lodged, or had been prepared incorrectly for the financial years set out above.
The plaintiff further alleged that the defendant had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in breach of s 56 of the Fair Trading Act 1987, in that, to summarise, the defendant had represented himself as capable of providing accounting and taxation services when he was not so capable. The plaintiff had relied on the representations and was induced to enter into a contract for financial services, to his detriment.
The plaintiff further alleged that the defendant had been negligent in failing to complete and lodge the accounts and returns he was engaged to complete and lodge.
At the hearing of the assessment for damages, Mr and Mrs Ott gave oral evidence, and affidavits of theirs were tendered. Mr Bulmer also gave evidence and provided an affidavit. The plaintiff had paid the defendant for most of the work complained of, not realising at the time that it was incorrect or incomplete.
The plaintiff on his own behalf and as agent for Mrs Ott and the entities, has also now paid Mr Bulmer’s accounts for undertaking the remedial work required. These accounts were provided, as was a detailed breakdown of the work performed and the manner of charging for it. The plaintiff’s claim is in contract, negligence and pursuant to the Fair Trading Act 1987. The claims are made in the alternative. In such a matter, the plaintiff is to recover the assessment most favourable to him (Brown v Southport Motors (1982) ATPR 40‑306).
The measure of damages in contract is the cost of making good the breach. The objective is to place the plaintiff in the position he would have been in had the contract been performed.
The tortious measure of damages is the amount needed to put the plaintiff into the position he would have been in had the breach of duty not occurred.
The measure of damages for a breach of the Fair Trading Act is conceptually wider than the tortious measure (Marks v GIO Australia [1998] HCA 69; 158 ALR 333 at para 9. It is unnecessary to explore the difference in this matter because all of the damages sought fit within either the contract or the tortious measure.
I am satisfied that Mr Bulmer’s accounts for necessary work performed to remedy the situation brought about by the defendant for Mr and Mrs Ott and the entities was the amount claimed, namely:
$6,758.95

+ $11,508.20
The ATO invoices for penalty tax and penalties have been provided and I am satisfied that Mr Ott paid on this account.
$8,962.90

+ $800.00
Audit fees of $2,145 for the Ott Superannuation Fund were claimed. The defendant simply failed to undertake these audits for the whole of the period in question.
Neither Mr Ott nor Mr Bulmer was able to say whether Mr Ott had been charged by the defendant for that work. It was necessary that it be done. In the absence of proof that it had already been paid for, I will not allow the whole of the amount claimed for the work to be done through Mr Bulmer (who enlisted further expert assistance to perform the work). Mr Bulmer’s opinion was that, had the work been billed for from 1997 to 2002, instead of all at once in 2003, it would have been $500 to $600 cheaper. I allow $550 towards the cost of the Ott Superannuation Fund audit on that basis.
The discovery of the deficiencies in the defendant’s work for him created something of a crisis in Mr Ott’s life in 2002. It was clear from the evidence of both Mr and Mrs Ott that they take pride in the efficient running of the business of Williams Mining and Industry Sales Pty Ltd. Appropriately, they take their obligation to the ATO very seriously. As a result, upon discovering that both they and the entities were in default, they energetically set about doing the work necessary to remedy the situation. Mrs Ott arranged for the defendant to return all of the records to her which he did, in a series of boxes. Between the beginning of November 2002 and the end of February 2003, she sorted through all of the documents in order to present them to Mr Bulmer for the purpose of the remedial work. Some of the statements which had been provided to the defendant were missing and Mrs Ott arranged to have replacements generated by the relevant bank. Mrs Ott described the state of the documents returned to her as “a shambles”. They included bank statements, WorkCover records, bank books, cheque books and other records. Mrs Ott estimates that she spent 450 hours during November, December, January and February going through the documents, seeking out and obtaining copies of missing documents, preparing documents for Mr Bulmer, meeting Mr Bulmer and generally piecing together a picture of what the defendant had done and what needed to be done to cure the deficiencies in what the defendant had done. Mrs Ott said she frequently went into the office early in the morning to spend a few hours on these tasks in addition to her ordinary work. She said that she worked 8 to 10 hour days, and that for some of the weeks in question, several days per week were devoted entirely to these tasks.
There are 17.5 weeks in the relevant period. If Mrs Ott spent 450 hours on the 1997/2002 accounts in that period then an average 27.5 hours per week of her time was devoted to those tasks. Mrs Ott impressed me as a sincere witness and I believe that her estimate is accurate, especially having regard to the number of entities involved. Her hourly rate of $20 was arrived at by reference to the information she obtained from Business SA concerning rates payable under the award relating to clerical workers. It is a reasonable rate. I award $9,000 on this head of damages. I accept that had someone other than Mrs Ott been contracted to do the work she did, the cost to Mr Ott and the entities would have been far greater.
Mr Ott has claimed 180 hours at $60 per hour. I accept that Mr Ott’s estimate of the time spent by him is accurate. He guided Mrs Ott’s work and attended meetings with Mr Bulmer and others. No basis, however, was given for the hourly rate of $60 and Mr Ott had no part in calculating it. It is too high. I will allow a rate of $20.
Total Award
I assess the plaintiff’s damages as follows:
Account fees  6,758.95


11,508.20

Audit fees -

difference between now and 97/02  550.00

ATO penalties  8,962.90


800.00

Mr and Mrs Ott’s time  12,600.00


Total:  $41,180.05
I will hear the parties as to interest and costs.