NEW SOUTH WALES COURT OF APPEAL
CITATION: Rexstraw v Johnson [2003] NSWCA 287 revised - 26/02/2004
FILE NUMBER(S):
40975/02
40944/02
40943/02
HEARING DATE(S): 11-13 August 2003
JUDGMENT DATE: 09/10/2003
PARTIES:
Bruce Richard Rexstraw
Raymond Keith Johnson
JUDGMENT OF: Sheller JA Tobias JA Foster AJA
LOWER COURT JURISDICTION: District Court
LOWER COURT FILE NUMBER(S): DC 865/00
LOWER COURT JUDICIAL OFFICER: Hogan AJ
COUNSEL:
For Johnson - Mr M McCulloch/Mr D F Villa
For O'Sullivan and Provident - Mr F Douglas QC/Ms R Sofroniov
For Rexstraw - Mr D R Conti
For Thirkettle & Ors - Mr I E Davidson
SOLICITORS:
For Johnson - P W Turk & Associates
For O'Sullivan - The Argyle Partnership
For Rexstraw - Phillips Fox
For Thirkettle - Emil Ford & Co
CATCHWORDS:
NEGLIGENCE - Professional responsibility - Scope of duty - Whether duty of care of mortgage broker coextensive with solicitor's duty of care - Whether director of company responsible for tortious acts of company - Apportionment of liability
FIDUCIARY DUTY - Scope of solicitor's fiduciary duty - Whether includes a duty to exercise reasonable care and skill - Whether a duty owed to principal solicitor by agent
TRADE PRACTICES - Whether statement that the valuation was "independent" was misleading - Trade Practices Act, s52.
ND
LEGISLATION CITED:
Trade Practices Act, s52
Copyright Act 1968 (Cth), s37
Law Reform (Miscellaneous Provisions) Act 1946, s5
DECISION:
a) In CA 4093/02 appeal allowed, Johnsons to pay the costs of that appeal
b) In CA 40975/02 appeal dismissed with costs
c) In CA 40944/02 appeal on liability dismissed, but appeal as to contribution allowed in part. Provident and O'Sullivan to pay the investor's costs of this appeal but no order as to costs as between Provident/O'Sullivan and Rexstraw
d) Parties to be required within 14 days of the date of this judgment to bring in short minutes of order to reflect the findings in [146]. Parties at liberty to apply on 48 hours notice for further directions in the event of disagreement
e) The Registrar of the Court of Appeal to forward a copy of this judgment to the Law Society of New South Wales and the Legal Services Commissioner.
4. Apportionment of responsibility as follows: Provident/O'Sullivan - 42.5%; Rexstraw - 33.5%; Johnsons - 24%.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40975/02
CA 40944/02
CA 40943/02SHELLER JA
TOBIAS JA
FOSTER AJAThursday 9 October 2003
BRUCE RICHARD REXSTRAW & ORS –v- JOHNSON & ORS
CATCHWORDS
NEGLIGENCE – Professional responsibility – Scope of duty – Whether duty of care of mortgage broker coextensive with solicitor’s duty of care – Whether director of company responsible for tortious acts of company – Apportionment of liability.
FIDUCIARY DUTY – Scope of solicitor’s fiduciary duty – Whether includes a duty to exercise reasonable care and skill – Whether a duty owed to principal solicitor by agent.
TRADE PRACTICES – Whether statement that the valuation was “independent” was misleading – Trade Practices Act, s52.
FACTS
Bruce Rexstraw,…
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- AGLC
- Rexstraw v Johnson [2003] NSWCA 287
- Case
- [2003] NSWCA 287
- Decision Date
CaseChat Overview and Summary
The court was required to determine the scope of the duty of care owed by a mortgage broker, whether it was coextensive with that of a solicitor, and the extent of a director's responsibility for a company's tortious acts. Additionally, the court considered whether a statement that a valuation was "independent" constituted misleading conduct under the Trade Practices Act, and the nature and scope of a solicitor's fiduciary duty, including whether it encompassed a duty to exercise reasonable care and skill, and a duty owed by an agent to a principal solicitor.
The court reasoned that the duty of care owed by a mortgage broker was not necessarily coextensive with that of a solicitor, and that a director could be held responsible for the tortious acts of their company. The court also found that the statement regarding the "independent" valuation was misleading. In apportioning responsibility for the loss suffered by the investors, the court allocated 42.5% to Provident/O'Sullivan, 33.5% to Rexstraw, and 24% to Johnsons. The court also ordered that the Registrar forward a copy of the judgment to the Law Society of New South Wales and the Legal Services Commissioner.
Orders
Orders of the court
a) In CA 4093/02 appeal allowed, Johnsons to pay the costs of that appeal
b) In CA 40975/02 appeal dismissed with costs
c) In CA 40944/02 appeal on liability dismissed, but appeal as to contribution allowed in part. Provident and O'Sullivan to pay the investor's costs of this appeal but no order as to costs as between Provident/O'Sullivan and Rexstraw
d) Parties to be required within 14 days of the date of this judgment to bring in short minutes of order to reflect the findings in [146]. Parties at liberty to apply on 48 hours notice for further directions in the event of disagreement
e) The Registrar of the Court of Appeal to forward a copy of this judgment to the Law Society of New South Wales and the Legal Services Commissioner.
4. Apportionment of responsibility as follows: Provident/O'Sullivan - 42.5%; Rexstraw - 33.5%; Johnsons - 24%.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
In the meantime (around 20 December 1996), Diamonds had faxed Johnsons advising that “both parties are now ready for immediate settlement” and that settlement was to be effected at the offices of Reynolds & Associates, Solicitors. Those solicitors apparently acted for Mr and Mrs Bartucz. On the same date, Diamonds faxed to Johnsons a copy of the proposed transfer of the property (the transfer document). As the primary judge correctly observed, that transfer was the central document in the case. It revealed that the transferors were Zoltan Bartucz and Gisela Bartucz and stated the following:“ConsiderationThe sum of $250,000 paid to Zoltan Bartucz and Gisela Bartucz by Queensland Mortgagee Sales Pty Limited ACN 066 221 592 the receipt of which sum is hereby acknowledged and in further consideration of the sum of $695,000 paid to the said Queensland Mortgagee Sales Pty Limited CAN 066 221 592 by Vorona Pty Limited ACN 069 406 864 the receipt of which sum is hereby acknowledged and with the consent and direction of the said Queensland Mortgagee Sales Pty Limited ACN 066 221 592.”The transfer document had been executed by Mr and Mrs Bartucz and by QMS as the ”Consenting Party”. It was dated 17 December 1996. Mr Johnson gave evidence that he had no recollection of having read the transfer document when it was received in his office on 20 December 1996 as he thought that he was on holidays at the time. The significant disparity between the purchase price of the property being paid by QMS to Mr and Mrs Bartucz and that paid by Vorona to QMS went unnoticed by Ms Harris, but was later noticed by Mr Johnson in circumstances to which I shall also return. Between December 1996 and February 1997, the various investors contacted O’Sullivan to confirm their investment. A document referred to as a “Specific Lending Authority” was first prepared on 3 February 1997, and later amended on 7 February 1997. It was not until this last-mentioned date that the identity of the actual investors and the amounts that each was prepared to contribute towards the loan of $450,000 was finally determined. Accordingly, O’Sullivan was unable to confirm to Vorona that Providence had raised the full amount of the loan until this date. Because of the delay in finalising the matter, Diamonds informed Ms Harris on or about 29 January 1997 that Vorona had rescinded the contract, but that there was a possibility of resurrecting the deal if the funds the subject of the proposed loan were deposited to Johnsons’ Trust Account no later than 30 January 1998. This information was passed on to O’Sullivan by Ms Harris on the same date. The Specific Lending Authority was prepared by Rexstraw and a copy was sent to each of the investors for their signature and return. In its final form it was addressed to Bruce R Rexstraw & Associates and set out the nine groups of investors. The first of these was “Dieter Biermann and Ursula Charlotte Biermann as Trustee of Biermann Superannuation Fund”. The document authorised and instructed Rexstraw:“to invest on my/our behalf the sum of $450,000 on the conditions and subject to its being secured by the mortgage described below.”After setting out details of the lenders and the borrower it provided as follows:“VALUE OF SECURITY3.The estimated value of the security at the date of the loan will be at least $695,000. The value will be evidenced by Russell Jackson of Jacksons International Pty Limited.4.Total principal sum to be lent under the mortgage: $450,000.DETAILS OF SECURITY5.The total principal sum shall be secured by way of a first registered mortgage over the security described in this Authority.”Thereafter were set out details of the security and the contribution of each of the lenders. A copy of the Specific Lending Authority was faxed by Rexstraw to Johnsons on 7 February 1997, showing the complete list of investors together with the amounts each was contributing.