Russell v Aitken Partners Pty Ltd
[2019] VCC 1164
•2 August 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMON LAW DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-05222
| Christopher Andrew Russell | Plaintiff |
| v | |
| Aitken Partners Pty Ltd | Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 13 - 17 May 2019 | |
DATE OF JUDGMENT: | 2 August 2019 | |
CASE MAY BE CITED AS: | Russell v Aitken Partners Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 1164 | |
REASONS FOR JUDGMENT
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Subject: PROFESSIONAL NEGLIGENCE
Catchwords: Claim against solicitors for breach of retainer and duty – alleged failure to advise on alterative causes of action – “penumbral” duty – importance of avoiding hindsight – claim misconceived in fact and law
Cases Cited:AJH Lawyers Pty Ltd v Hamo [2010] VSCA 222; Amadio Pty Ltd & Anor v Henderson (1998) FCR 149; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Badenach v Calvert (2016) 257 CLR 440; Chappel v Hart (1998) 195 CLR 232; Commissioner of Main Roads v Jones (2005) 79 ALJR 1105; Goddard Elliott v Fritsch [2012] VSC 87; Hawkins v Clayton (1988) 164 CLR 539; Matthews v SPI Electricity Pty Ltd (Ruling No 6) [2012] VSC 70; Namberry Craft v Watson [2011] VSC 136; Quigley v the Commonwealth (1981) 35 ALR 537; Rosenberg v Percival (2001) 205 CLR 434; Spiteri v Roccisano [2009] VSC 132
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the Defendant | Mr M Garrett | Obst Legal |
HIS HONOUR:
Summary and outcome
1 The plaintiff, Christopher Russell, sues his former lawyers Aitken Partners in relation to the termination of a contract (“Newham contract”) for the purchase by Mr Russell of a property at 51 Bolgers Lane, Newham (“Newham property”). I should note at the outset that most of the documentation in the case refers to Mr Russell with the honourific “Dr”. However, at the commencement of the hearing Mr Russell said he would “like to be just referred to as Mr Russell”. I was content to accede to his request, but was concerned to mention it in these reasons, in case a reader thought my failure to address the plaintiff as Dr Russell was a sign of disrespect.
2 An intelligible formulation of Mr Russell’s claims in the proceeding was both elusive and shifting. In very broad terms, Mr Russell originally alleged that Mr Bradley, the partner at Aitken Partners responsible for his matter, gave him negligent advice in relation to the contract termination, and thus failed to protect his interest in the Newham property. But by a very late application to amend his claim, Mr Russell sought to argue instead that Mr Bradley’s negligence was in failing to advise him to go elsewhere for advice.
3 I will dismiss Mr Russell’s application to amend and give judgment for the defendant in the proceeding. For the reasons below, I consider that Mr Russell’s claims, both as originally formulated and in the proposed amended form, are misconceived both in fact and law. Mr Bradley’s conduct of Mr Russell’s matter cannot be faulted. Indeed, having regard to the circumstances in which he was instructed, the quality and timeliness of Mr Bradley’s advice was exemplary. Moreover, even if any negligence of the kind asserted had been established, Mr Russell failed to articulate in his pleadings, position paper or in argument (and I was unable otherwise to discern), a coherent counter-factual or any causal link between that negligence and Mr Russell’s alleged loss.
4 On the question of costs, my tentative view is that I should order that the plaintiff pay the defendant’s costs of the proceeding on the standard basis, in default of agreement. However, in case either party considers that some other order on costs is appropriate, I will make orders allowing either (or both) parties to make submissions in writing accordingly, and thereafter determine the question of costs on the papers. Failing the filing and service of any such submissions by the date stated in the orders, the order on costs will be in accordance with my tentative view above.
Background
The Newham and Bayswater properties
5 In around August 2013, Mr Russell was looking to purchase a farming property. He saw an advertisement on realestate.com for what seemed to him to be a suitable property, namely, the Newham property. The advertisement included reference to a large dam and a potable bore “which feeds a reticulated watering system in all cell grazing paddocks…good solar power fencing set up for cattle cell grazing, a chook house and a vegetable garden”. On about 6 September 2013, after conducting an inspection, Mr Russell signed a contract to purchase the Newham property and paid a deposit of $85,300.
6 The owner of the Newham property had been overseas when Mr Russell conducted the pre-purchase inspection, and he arranged to conduct further inspections with the owner in October 2013. During these inspections, Mr Russell learnt that a number of the features of the Newham property were not as they had been advertised. In particular, the cell grazing infrastructure was not operational and some of it had been dismantled. By this time, Mr Russell had engaged solicitors David Stagg Tonkin & Company (“DST”) to act for him on the purchase of the Newham property. On 25 October, he informed DST of his concern that the features of the property had been misrepresented to him.
7 Thus began a process of escalating dispute between Mr Russell and, first, the vendor of the Newham property and, later, each of the law firms acting for him in relation to that initial dispute. There were many aspects of those various disputes canvassed during the trial. I summarise below those of direct relevance to the issues in this proceeding. But before doing so, I should briefly mention one other relevant background fact concerning a property in Bayswater which was registered in Mr Russell’s name as executor of his father’s estate.
8 The Bayswater property was the most substantial asset in Mr Russell’s late father’s estate. It had been left by Mr Russell senior to Mr Russell and his brother Stephen. However, by a Deed of Family Arrangement dated 7 April 2012, Mr Russell and his brother agreed to confer a one third interest in the Bayswater property on their stepmother, Maribel Russell. Mr Russell’s evidence was that, at around the same time as he was looking for a farming property, each of his brother and stepmother had agreed to the sale of the Bayswater property.
9 It was not in dispute that Mr Russell was planning to use his share of the proceeds of the sale of the Bayswater property towards the purchase of the Newham property. As discussed further below, what was in dispute was whether Mr Russell had the financial resources to complete the purchase of the Newham property without access to those proceeds. Mr Russell executed a contract for the sale of the Bayswater property on 26 September 2013.
10 Mr Russell explained that he and his stepmother had been living together at that property and planned to move from there to the Newham property. But when the contract for the sale of the Newham property terminated, his stepmother decided she did not want to move and on 12 November 2013 lodged a caveat over the Bayswater property. His brother Stephen also lodged a caveat over that property dated 28 March 2014. It seems that the sale of the Bayswater property did not proceed, or at least not at a time that is material to the issues in this proceeding.
Attempted withdrawal from the Newham contract
11 On 31 October 2013, shortly after receiving Mr Russell’s instructions about the misrepresented features at the Newham property, Mr Elfman of DST sent a letter to the vendor’s conveyancer, Fairhurst Conveyancing, setting out Mr Russell’s concerns and stating that:
“From the information we have received from our client there appears to have been misleading and deceptive conduct on the part of your client and/or your client’s agent and our client wishes to withdraw from the Contract and seeks an immediate refund of his deposit money.”
The response by Fairhurst Conveyancing is dated 6 November 2013. It denied any misrepresentation and refuted each of Mr Russell’s allegations.
12 A few days after being informed of this, Mr Russell emailed Julian Davies of Keatings Real Estate, the vendor’s estate agents, to arrange a further inspection of the Newham property. He copied Mr Elfman of DST to this email. Mr Russell later told Mr Bradley that he personally contacted the vendor’s agent because DST “did nothing, wouldn’t respond to him (or other side) or do anything. That’s why he acted direct – frustrated by lack of attention to his matter”. This is recorded in Mr Bradley’s file note of a telephone conversation with Mr Bradley on 6 May 2014. The inspection took place on 19 November 2013.
13 On the day of the inspection, Mr Russell emailed a document he had prepared headed “TO WHOM IT MAY CONCERN” to Mr Davies of Keatings Real Estate, with a copy to Ms Nora Yin of DST. In this document Mr Russell sets out three statements which he said contradicted the description of the Newham property’s external features as advertised by Keatings Real Estate. The document concludes:
“If it is not possible to renegotiate in good faith with the Vendor on mutually acceptable terms ending the existing Contract between Vendor and Purchaser and refunding the latter’s deposit in full, then I shall, forthwith, instruct my solicitor to take action authorising my withdrawal from the said Contract due to misrepresentation of the property by the Vendor and/or his Agent”.
14 Mr Russell sent a further email to Mr Davies on 20 November 2013, with a copy to Mr Elfman of DST, saying:
“It is noteworthy, in any event, that these changes to the property confirm the allegation that I have made, that is, that the property was originally the subject of misrepresentation by the Vendor and/or his Agent and that the Contract that the Vendor and I have signed is, therefore, legally invalid.
I have, notwithstanding, made an offer in good faith to the Vendor that we negotiate a new Contract, albeit this is conditional on the refund of my deposit.
Please note that I shall now instruct my solicitor to take immediate action in order to allow me to withdraw from the contract legally in which case the offer to renegotiate will be withdrawn”.
15 Mr Russell also sent an email to DST that day saying “I would like you to take action immediately to enable me to withdraw from the Contract and recover my deposit”. It appears that around this time, the vendor retained solicitors McMahon Fearnley to act for him in the developing dispute with Mr Russell.
16 On 28 November 2013, McMahon Fearnley wrote to DST responding to the allegations of misrepresentation made by DST in their letter to Fairhurst Conveyancing of 31 October 2013. In substance, the letter confirmed that the vendor disputed the allegations of misrepresentation for the reasons set out in the earlier letter from Fairhurst Conveyancing, declined Mr Russell’s proposal to terminate the contract and re-negotiate a new agreement, and sought confirmation by 29 November 2013 that Mr Russell was proceeding with the settlement. DST’s response dated 3 December 2013 stated that “Our client is currently obtaining counsel’s opinion in relation to this matter. We will inform you by this Friday 5 December 2013 whether or not our client intends to rescind the Contract of Sale”.
17 The counsel from whom Mr Russell was obtaining an opinion was John Oswald-Jacobs. Mr Oswald-Jacobs had been retained by DST some time before 2 December 2013. On that date, Mr Elfman emailed Mr Russell noting that he had not received counsel's written opinion yet, but that counsel had advised him over the phone that: “he does not believe we would succeed in avoiding the contract. You could therefore be potentially up for considerable damages if you do not proceed with the purchase. I will forward you counsel’s opinion as soon as I receive it but in the meantime I will need your urgent instructions as to what you propose doing” . Mr Russell replied later that day by email, stating (among other things):
“Please note that I am not proceeding with settlement.
I am disputing the validity of the Contract and will continue to do so whether or not litigation is required…
I am not proceeding with settlement.”
18 McMahon Fearnley sent a letter to DST on 9 December 2013, noting that they had not received any further correspondence since DST’s holding letter of 3 December. They concluded by saying “Accordingly, we presume your client will be proceeding with the settlement on 17 December 2013”. Having received no response, on 13 December, McMahon Fearnley sent another letter which again said “Please confirm if your client will be proceeding with the settlement on 17 December 2013”. Mr Russell was informed of these letters and on 13 December, he sent an email to Mr Elfman which said:
Geoff
I am very concerned to hear that the Vendor’s solicitors are asking you repeatedly whether I am proceeding with settlement. For them to be uncertain about this is very worrying given the potential it may have to influence whatever legal advice they may give to the Vendor. Obviously, if the message getting through is that I may be indecisive about withdrawing from the Contract, then the Vendor may be more encouraged to seek enforcement.
Please make the Vendor’s solicitors clear as crystal on this. I gave notice that I am withdrawing from the Contract on 25 October. Nothing has changed, except that the other side evidently appears uninformed for some reason.
Chris
19 Mr Oswald-Jacobs prepared at least two drafts of his advice that were sent to Mr Russell between about 10 and 12 December 2013 to enable him to provide further instructions on factual matters as set out in the drafts. Mr Russell sent the first draft back with amendments and a covering email dated 10 December 2013, which included the following instructions:
“Please note that I object strongly to Counsel's apparent rebuke of me in his draft Memorandum as follows. ‘Dr Russell has informed my instructors that he does not intend to discharge his obligations under the Contract whether or not he in fact has any grounds for rescinding it.’
This, frankly, is unacceptable to me. Whether I have any grounds for rescinding the Contract is moot. If, indeed, I have no grounds for rescinding the Contract, then I have no choice in the matter. But, at this stage, I am only asking of my legal representatives that the reasons for my claim to rescind the Contract be made well known to the Vendor.
What may, perhaps have been misunderstood by Counsel is that I do not intend to proceed with settlement whether or not I am involved in litigation. This is quite a different matter. Please draw this clearly to Counsel's attention. Also, I understand full well the risk of potential liabilities and do not seek written advice from Counsel on that count.”
20 In the final draft of the advice apparently sent by Mr Oswald-Jacobs to both Mr Russell and Mr Elfman shortly before midnight on 12 December 2013 under cover of an email noting that the advice was “approaching final form”, Mr Oswald-Jacobs concluded as follows:
“In my opinion it is arguable in this case that Dr Russell did in fact rescind (i.e. lawfully withdrew from and ended) the Contract on or about 29 October 2013. If that argument was successful he would be entitled to a return of the deposit paid by him pursuant to the Contract.
I do however remain concerned that a court in this instance may take the view that Dr Russell simply changed his mind about the property after signing the Contract. It may therefore seek to find a way of determining that the three representations, although partly or wholly false, were not in fact actionable.
…
No doubt if Dr Russell chooses not to affect (sic) settlement on that date or at all, a Notice of Default will be served by the vendor on Wednesday 18 December. At that point I would of course be prepared to give further advice if Dr Russell wanted then to institute proceedings seeking a declaration that he had rescinded the Contract and seeking a return of the deposit.”
21 A letter dated 18 December 2013 from Mr Elfman of DST to Mr Bradley of the defendant forwarding documents from the DST file, indicates that Mr Russell instructed DST to tell Mr Oswald-Jacobs “not to continue because he wasn’t interested in hearing what could happen if he didn’t settle”. In the meantime, on 16 December 2013, DST wrote to McMahon Fearnley relevantly stating as follows:
“We refer to our letter dated 29 October 2013 (sic: 31 October 2013). We confirm that as at the date of, and by means of, that letter our client rescinded the Contract of Sale into which he entered as purchaser with your client in relation to the above property. Our client rescinded the Contract of Sale because the advertising brochure which was provided to him by your client's agent, Keating's Real Estate Pty Ltd, made the following misrepresentations…
Each of those representations was false. On discovering the falsity of those representations our client was entitled to, and did, rescind the Contract of Sale. He is now therefore entitled to the return of the deposit which he paid pursuant to the Contract of Sale.
On his behalf we therefore hereby demand the return of that deposit. Please note that if the deposit is not paid to this firm by the close of business on Monday, 16 December 2013, our client will consider instituting proceedings against your client seeking a declaration that our client rescinded the Contract of Sale on or about 29 October 2013, and an order that the deposit be returned to him.”
22 McMahon Fearnley responded later the same day, noting (among other things) that Mr Russell had inspected the property on 31 August 2013 (before entering into the contract) and again on 19 November 2013, denying the allegations and rejecting Mr Russell’s rescission. The letter concluded that Mr Russell had repudiated the contract and foreshadowed the service of a default notice if Mr Russell did not settle by 4pm the following day (17 December 2013). On that date, DST sent Mr Russell an email informing him that DST was unable to assist him any further as commercial litigation was outside their practice area, and recommending Aitken Partners instead.
The retainer of Aitken Partners
23 17 December 2013 was a Tuesday, and a few days before many businesses and institutions would be closing for the Christmas break. On that date, both Mr Elfman of DST and Mr Russell contacted Mr Bradley by telephone. According to Mr Bradley’s file note of his telephone conversation, Mr Elfman told Mr Bradley that Mr Russell “had purchased a property and no longer wanted to settle the contract of sale on the basis of an advertisement from the agent which was said to have misrepresented the property”. Mr Bradley’s file note of his subsequent call with Mr Russell notes that Mr Russell explained that the Newham property was due to settle that day and that Mr Russell needed to sue for the return of deposit.
24 Later that afternoon, Mr Bradley received an email from Mr Russell attaching the letter from McMahon Fearnley dated 16 December 2013, referred to above. In his email, Mr Russell said of the Vendor’s letter: “It’s my impression that I am being forced to institute proceedings to get my deposit back in the hope that my resolve is not firm. But, it is very firm; and I want the Vendor and his solicitors to be in no doubt whatever as, perhaps, they are, for whatever reason”.
25 After the calls and emails of 17 December, Aitken Partners’ work on the matter progressed very quickly, particularly considering the proximity to the December holiday period. On 18 December, Mr Bradley received two further emails from Mr Russell, the first foreshadowing that Mr Russell would forward the final draft advice from Mr Oswald-Jacobs, and explaining that he had asked Mr Oswald-Jacobs not to complete his advice. The second, attached the final draft advice, with Mr Russell’s comments. Mr Bradley responded saying that he was still waiting for material from Mr Elfman of DST. This came that afternoon, in the form of two emails with numerous attachments comprising documents from the DST file relating to the Newham property.
26 After receiving the documents from Mr Elfman, Mr Bradley emailed Mr Russell seeking to arrange a meeting the following day, 19 December. In his email, Mr Bradley advised Mr Russell that he “needed to urgently demand repayment of the deposit”. Mr Bradley also advised that, if the vendor refused, Mr Russell should demand an undertaking from the vendor's lawyers that they would retain the deposit on trust. If this was not forthcoming, Mr Bradley foreshadowed that “we might need to apply to the Court for an injunction preventing its disposal”, and that formulating the claim itself could then wait until after Christmas.
27 At 5.07pm on Wednesday 18 December 2013, Mr Bradley received a copy of the Notice of Default and Rescission that had been served by McMahon Fearnley that day. The Notice specified Mr Russell’s default as the failure to pay the balance of the purchase price due in accordance with the contract by 4pm on 17 December 2013, and gave notice that unless the default was remedied within 14 days and interest and costs also paid, the contract would be rescinded. Within minutes, Mr Bradley forwarded the notice to Mr Russell. Later, Mr Bradley received a call from Jordana Dymond of McMahon Fearnley, during which he advised Ms Dymond, on a without prejudice basis, that his discussions with Mr Russell had been about commencing proceedings for the recovery of the deposit, without any talk of settling.
28 By the morning of Thursday 19 December 2013, Mr Bradley had still not received DST’s complete file, which Mr Elfman had apparently sent by DX the night before. The file was not in fact received by Mr Bradley until the following morning (20 December). Thus Mr Bradley had not had the opportunity to review the file before his meeting with Mr Russell.
29 Mr Bradley met with Mr Russell at Aitken Partners’ office on 19 December. He gave evidence that he used his handwritten notes of the meeting to create a record of Mr Russell’s instructions, in the form of a draft proof of evidence. These instructions included that Mr Russell had not signed a deposit release notice, and had lost faith in the vendor, particularly as a result of his inspections of the Newham property during which the vendor made excuses for his inability to demonstrate that the property’s features were in working condition. For example, he said he was unable to turn on the bore because he was out of petrol for the pump. During his evidence, Mr Russell refuted the accuracy of Mr Bradley’s notes, saying that he had actually lost faith because the vendor had declined his offer to renegotiate. Regardless, it was not in dispute that by December 2013, Mr Russell had lost faith in the vendor.
30 Mr Bradley’s evidence was that during the 19 December meeting, he advised Mr Russell that, in his opinion:
· DST’s letter to the vendor’s solicitor dated 31 October 2013 was ineffectual in terminating the contract of sale, because it stated: “our client wishes to withdraw from the Contract”, rather than stating that Mr Russell had terminated the contract;
· from what he had seen in the documents he had reviewed, Mr Russell had shown uncertainty in his actions in respect of terminating the contract, despite his instructions that he did not want to settle the contract; and
· if Mr Russell formally engaged Aitken Partners, the firm would need to serve a notice of termination on his behalf, to make it clear that he had terminated the contract on the basis of the vendor’s misrepresentations.
31 I pause at this point in the narrative to draw particular attention to the second of the above points. It became apparent early in the course of the trial that this advice was the source of considerable disquiet for Mr Russell. Indeed, it seemed to be the wellspring for many of Mr Russell’s later complaints about Mr Bradley’s conduct of Mr Russell’s matter. In a nutshell, Mr Russell protested that it was false, and that he had not shown uncertainty. He insisted that he had been resolute in his desire to bring the Newham contract to an end, get his deposit back and negotiate a new contract.
32 As discussed further below, the problem with this position doggedly adhered to by Mr Russell throughout the proceeding and trial, is that it missed the point. Mr Bradley was not here saying that Mr Russell was in fact uncertain in his resolve about terminating the contract. Rather, he was advising that the documents suggested he had shown uncertainty in his dealings with the vendor. Whether he had felt uncertainty or intended to show it (and what Mr Bradley believed about this) was neither here nor there. What was important, and what Mr Bradley properly advised Mr Russell, was that the documents and the nature of his dealings in relation to the property were equivocal and probably ineffective to give rise to a termination. Based on my own review of the documents and evidence, in my view this advice cannot be faulted.
33 Mr Bradley also gave Mr Russell an engagement letter and cost disclosure statement during the meeting. The engagement letter relevantly stated as follows (emphasis added):
“Current Position
A Notice of Default and Rescission Notice was served yesterday giving you 14 days in which to settle the purchase of this property. If you do not settle and a Court finds that you were not entitled to avoid the Contract, you might be liable for penalty interest, any shortfall upon resale of the property by the vendor, other foreseeable losses of the vendor and legal costs. It follows that a speedy resolution of this matter is of great importance.
Scope of Works
We anticipate that the legal work that we will conduct on your behalf will initially involve:
1.formally terminating the contract of sale and demanding the return of the deposit;
2. reviewing the documents and advising as to the legal position;
3.briefing a barrister to draw a Statement of Claim or an originating motion with a supporting affidavit for the return of the deposit;
4. negotiating with the lawyers for the vendor.”
34 That same evening, Mr Bradley drafted a Notice of Termination and emailed the draft to Mr Russell for his approval. Mr Russell replied, indicating that the draft Notice “seems very good to me” and pointing out a typographical error.
35 Mr Bradley received the DST file probably mid to late morning on Friday, 20 December 2013. At 10.43am Mr Russell emailed Mr Bradley, relevantly stating as follows:
“By way of follow up to our discussion yesterday, Thur Dec 19, I refer to my offer to renegotiate the Contract with the Vendor in November.
I did not discover overnight, as it were, that the Property's external features had been misrepresented. I visited the Property, on three occasions, between October 5 and November 19 in order to clarify the situation. It is true my feelings towards the Property hardened gradually over this time, but the fact is that I had already signed the Contract, whereas it also remains true that, if I had not signed the Contract, I would have been dissuaded had I not been misled by the Vendor.
What I also fear is the possibility that the action taken by a family member in lodging a caveat on the property for sale at which I currently reside [namely, the Bayswater property] has prejudiced me in this matter. There is nothing I can do about that, but I also want to make the point that while the cost of restoring the Property to its former operational status would not be great, that does not mean surely that it was not understandable on my part to avoid the Contract when the Vendor refused to renegotiate. I have accused him of deceptive conduct after all.
Again, if I am missing the point, then I would be grateful for further clarification.”
36 Mr Bradley served the notice of termination on the vendor’s solicitors McMahon Fearnley by email at 12.19pm. That notice was in the form approved by Mr Russell the evening before. At 3.56pm on 20 December, Mr Bradley replied to Mr Russell’s email sent earlier that day, in terms as follows:
“I do not, by any means, think that either:
1.your willingness to investigate the extent to which facts were misrepresented to you, or
2. your willingness to renegotiate the Contract
is decisive of your entitlement to terminate for misrepresentation. My concern is that attempts might be made to characterize your uncertainty as evidence that the misrepresentations were 'minor' or 'not material'. We simply have to recognise that as a possibility.
In relation to the sale of your existing home, I can't see how anything there is relevant- unless you needed the proceeds of a sale of it in order to settle this purchase. If that was the case, you can expect that the Vendor will try to argue that the unavailability of funds was the real reason why you terminated the purchase.
Anyway, the Notice has been sent and we will see what, if any, response we get by the 8th.
I'll speak to you then.”
37 The next thing that happened was on 17 January 2014, when Mr Bradley received a letter from McMahon Fearnley advising that the vendor’s Notice of Default and Rescission had expired and the Newham contract was rescinded. The letter also advised that the vendor reserved his rights in relation to his claim for any other damages arising due to Mr Russell’s failure to proceed with the purchase of the Newham property. Mr Bradley forwarded a copy of McMahon Fearnley’s letter to Mr Russell that afternoon. In his covering email, he advised that counsel ought to be briefed and that if it was necessary to litigate, “it would probably be better to be the Plaintiff”. He also advised Mr Russell that he needed to weigh up the potential for legal costs to exceed the amount in dispute, and asked him whether he could estimate how much it would cost to get the Newham property into the condition he had expected it to be in.
38 Mr Russell telephoned Mr Bradley later that day and instructed Mr Bradley to brief counsel to advise and prepare a writ. During the course of that conversation, Mr Bradley repeated the advice in his email, that Mr Russell should consider whether it would be better to compromise in some way and spend money on repairing the Newham property rather than on legal fees. Mr Bradley’s evidence was that Mr Russell told him that he did not wish to complete the contract because he did not want the Newham property and he had “lost all faith”. On 19 January 2014, Mr Russell emailed Mr Bradley, stating in answer to Mr Bradley’s question regarding the cost of repairing the Newham property, that at one stage he felt that he was entitled to have $20,000 taken off the agreed price, to compensate him for the fact that the Newham property was not a going concern as represented to him.
39 On 29 January 2014, Mr Bradley confirmed in an email to Mr Russell that he had briefed counsel David Lloyd. On 3 February, Mr Bradley sent a draft statement of claim prepared by Mr Lloyd to Mr Russell, and sought his instructions as to whether the draft could be sent to McMahon Fearnley. Mr Bradley’s evidence was that he wished to make clear to the vendor that Mr Russell was ready to issue a proceeding in the event the deposit was not returned, as well as give the vendor appropriate notice of the claim so as to avoid a potential adverse costs order. Mr Russell agreed to this course and the draft was sent to McMahon Fearnley on 4 February. On the same day, Mr Russell emailed Mr Bradley and indicated that he was happy with the letter that had been sent to McMahon Fearnley, and that he was “more than reluctant to offer money to the Vendor”.
40 On 6 February, the vendor filed a proceeding against Mr Russell. Mr Bradley notified Mr Russell and asked him to confirm that Aitken Partners could accept service on his behalf, noting that this was “merely to save the unnecessary expense of a process server”. Mr Russell confirmed that Aitken Partners could do so. The following day, 7 February, Mr Russell sent two emails to Mr Bradley. The first (timed at 12.08am) said “Robert, I thought we were to be plaintiff…”. The second timed at 6.17am said:
“I have always assumed that I will ‘need to fight’ to regain my deposit. Please do NOT accept service without further discussion with me. Disregard earlier email.
Please phone me asap to clarify whether we are still in a position to institute proceedings of our own which, in fact, is what I have wanted since Nov 20 last year (see email to Elfman). Otherwise, as I see it, I have lost all advantage in negotiating a possible settlement if the Vendor can avoid providing a defence to my claims prior to trial. If that is so, I will not be in a position to settle on any terms other than those already offered.”
41 Mr Russell then called Mr Bradley, stating he was very disappointed that the vendor had issued proceedings first. Mr Bradley explained to Mr Russell that he could still file a counterclaim which the vendor would need to defend. After this discussion, Mr Russell once again consented to Aitken Partners accepting service on his behalf. On 10 February 2014, Mr Bradley briefed Mr Lloyd to draft a defence and amend the draft statement of claim he had prepared to become a counterclaim.
42 On 13 February, Mr Russell sent Mr Bradley an email stating, among other things, that:
“Please note, firstly, that I do not resile from my claim that I have a right to withdraw from the Contract owing to false and misleading representations, but, in strict confidence…I have to say that if all other factors had been neutral or equal as it were, then it may not have been the case that I would have withdrawn from the Contract. The fact of the matter, however, is that everything else was not equal. I was involved in a personal dispute with my stepmother who, in the end, at least, was opposed to selling the family's Bayswater residence under any circumstances. I acknowledge that this had financial ramifications which were instrumental in my proceeding to claim the right, on the relevant grounds, to withdraw from the Contract on the Newham property. As things turned out, I did not enjoy the confidence of my previous solicitor allowing me to discuss these issues with him, but I hope that I can, yet, be more forthright with you. In any event, I would like to bring the matter clearly to your attention whatever bearing it may have on how we proceed in the future. lf you have any questions, please let me know.”
43 Mr Russell approved a draft copy of his defence and counterclaim on 6 March 2014, ahead of the document being filed and served on McMahon Fearnley. On 24 March, Aitken Partners sent a revised retainer to Mr Russell, with a new scope of works which included conducting the defence and counterclaim on his behalf, attending mediation, and conducting the trial if no settlement could be reached.
Potential claim against DST
44 Mr Bradley forwarded Mr Russell a copy of the vendor’s reply and defence to counterclaim on 16 April 2014. Mr Russell then asked to have another look at the counterclaim that had been prepared and filed on his behalf. Mr Bradley provided him with a copy of the document, which was substantially in the form reviewed by Mr Russell on 6 March and amended in accordance with his instructions. On 22 April, Mr Russell emailed Mr Bradley, relevantly stating as follows:
“1. There is a serious error contained in my ‘Defence and Counterclaim’…On or about 20 December is the date Aitken took over from Stagg Tonkin as my solicitors. It is not the date I withdrew from the contract. The problem is, and always has been, that Stagg Tonkin failed abysmally to act for me in the proper manner of solicitors after my withdrawal from the Contract on 29 October, 2013, but, please note, I will not have it said in court submissions that I withdrew from the Contract at or about the date of settlement.
…
3. I would like you to call me to discuss whether I should try and settle as soon as possible with the plaintiff in order to pursue a claim in negligence against Stagg Tonkin solicitors. I would like to know if Aitken Partners would be prepared to act for me”
45 In his reply dated 24 April 2014, Mr Bradley began by noting that when Aitken Partners took over the conduct of his matter, “we were concerned that there was not a sufficiently certain act terminating the Contract”, and they obtained Mr Russell’s instructions to serve a notice of termination. He said that the barrister had since looked at everything and concluded that the safest course was to rely on that notice. Mr Russell replied on 28 April, stating that he had no difficulty with the statement that DST were not sufficiently unequivocal, but that he had not been similarly uncertain, saying his desire to renegotiate with the vendor “was conditional on the Vendor’s accepting the end of the Contract. I was perfectly unequivocal on that before visiting the Property on 19 November”.
46 Mr Russell’s later correspondence with Mr Bradley further reinforced his assertion in his 28 April email that at all times during the relevant period, he wished to terminate the Newham contract. On 29 April, he sent Mr Bradley an email in which he said that (emphasis added) “The truth of the matter is that I changed my mind about nothing, whereas [Mr Elfman] failed to change my mind about withdrawing from the Contract regardless of whether the Property was the subject of false and misleading representations”. According to Mr Bradley’s file note of a telephone call on 6 May, Mr Russell again raised the question of suing DST and said that his instructions to Mr Elfman were not equivocal, and that it was clear he wanted out of the contract.
47 During the call on 6 May, Mr Bradley suggested briefing counsel to advise on the merits of joining DST to the vendor’s proceeding. Two days later, Mr Bradley emailed Mr Russell a draft memorandum to counsel for his consideration. Mr Russell’s comments on the draft memorandum included “I acknowledge that [his stepmother lodging a caveat on the Bayswater property] had financial ramifications for me which were implicated, albeit not decisive, in my action in withdrawing from the Contract on the grounds of false and misleading representation”.
48 Later that month, Mr Bradley briefed Mr Ian Upjohn, who ultimately advised Mr Russell that DST ought not be joined to the vendor’s proceeding because it was likely DST would raise the failed sale of the Bayswater property and assert that Mr Russell did not at any time give clear instructions to terminate. His advice was that such an outcome would prejudice Mr Russell in his claim against the vendor. Mr Upjohn suggested that they instead enter into a standstill agreement with DST and place them on notice that if Mr Russell was not 100% successful in his claim against the vendor, he would issue proceedings against DST to recover any shortfall. Mr Bradley had given similar advice during the 6 May call with Mr Russell, recording in his file note “If you join them they might raise the issue we have been trying to avoid – other contract fell over leaving Chris without funds to settle this one; if they joined they can raise it probably will”.
Termination of Aitken Partners’ retainer
49 From around mid-July 2014 until Mr Russell’s termination of Aitken Partners’ retainer on 14 August 2014, there was back and forth communication between Mr Russell and Mr Bradley relating primarily to Mr Russell’s renewed suggestions that DST be joined to the vendor’s proceeding. In several emails sent during this period Mr Bradley reiterated counsel’s reasons against such a course and advised that the claims be pursued sequentially, as complete success against the vendor meant that no further claim against DST could be pursued and Mr Russell might be liable for their costs. Mr Russell’s replies shifted between accepting these reasons and continuing to press for DST’s joinder; some of his emails also suggested alternatives such as settling the vendor’s proceeding immediately and then pursuing DST, or approaching the vendor about joining in an action against DST.
50 On 24 July 2014, when Mr Bradley was on annual leave, Mr Russell sent an email to him stating that, according to information available on realestate.com, the Newham property had been sold for $825,000. Mr Russell indicated that this was in the vicinity of what he would have paid if the vendor had agreed to renegotiate the contract with him in November 2013. He asked for advice as to an appropriate amount to offer the vendor in order to settle the proceeding. Mr Philip Fox of Aitken Partners responded to this email, informing him that Mr Bradley was on leave and noting that Mr Upjohn had said there was no urgent need to settle the matter or make a settlement offer.
51 After Mr Bradley returned to work, he met with Mr Russell on 1 August 2014 to discuss the latter’s concerns about not settling the vendor’s proceeding as soon as possible and delaying the institution of proceedings against DST. Following this meeting, Mr Bradley emailed Mr Russell a letter dated 4 August 2014 setting out a dot point summary of Aitken Partners’ advice, including their opinion that the vendor had made misleading and deceptive statements and Mr Russell was entitled to terminate the contract and obtain a refund of the deposit.
52 In relation to joining DST to the vendor’s proceeding, the letter repeated Mr Upjohn’s advice that it would be better not to do so, and stated that Aitken Partners “believe that the facts as we know them, do not make it clear that you instructed [DST] to terminate, rather they are consistent with an uncertainty as to your preference between a negotiated termination or a re-negotiated contract”. The letter noted that “such uncertainty is understandable because it appears that your former lawyers did not advise you of the alternatives open to you and the consequences for you”, and reiterated Mr Upjohn’s advice to enter into a standstill agreement with DST and their insurers before discussing any settlement with the vendor.
53 On 4 August 2014, Mr Russell sent two successive emails to Mr Bradley. The first responded to a draft letter to DST that Mr Bradley and Mr Upjohn had prepared, seeking a standstill agreement. Mr Russell said that he did not approve of the draft and did not want it to be sent to DST. He instead gave instructions to advise DST that unless they accepted liability for all financial expenses incurred by him in defending the vendor’s proceeding, they would be joined. In the second email, Mr Russell referred to Mr Bradley’s letter of 4 August and stated that he had made it clear to the vendor and DST that his “preference for a re-negotiated contract was CONDITIONAL on what I expressly stipulated as being necessary i.e. the refund of my deposit and the Vendor’s agreement to terminate the Contract”. He then said that since any uncertainty in his actions was the result of Mr Elfman’s conduct, it was “imperative that Stagg Tonkin are joined to [the vendor’s] proceedings”.
54 Mr Bradley’s response to these two emails, also on 4 August, again repeated the reasons for not joining DST and wrote, “Chris, I do not want to accept instructions from you that fly in the face of counsel’s advice and which I think will prejudice your chances and will cause legal costs to sky rocket”. Mr Russell replied the same day, once again indicating that he was willing to accept Mr Bradley’s advice not to join DST to the vendor’s proceeding. However, on 10 August 2014, Mr Russell emailed Mr Bradley a letter dated 8 August 2014 taking issue with Mr Bradley’s view that Mr Russell had sought to terminate on mutually acceptable terms. Rather, he said that his instructions had always been to terminate and then try to renegotiate: “I tried to terminate the Contract on or about 25 October and then I tried to renegotiate on about 19 November”.
55 On 14 August 2014, Mr Russell telephoned Aitken Partners requesting the return of his file and terminating the retainer. Following this, and presumably after perusing the documents on Aitken Partners’ file, Mr Russell emailed Mr Bradley on 5 November 2014. In this email, Mr Russell reiterated that there was no evidence of any change in his instructions to DST “which might have made it difficult for Aitken Partners to accept [his instructions that he] had sought both to withdraw from the Contract and to renegotiate with the Vendor”. He then asked why Mr Bradley had “withheld” certain correspondence on the DST file from him, Mr Lloyd, and Mr Upjohn.
56 The relevant correspondence (“DST Correspondence”) comprised two emails and a letter. The first email was dated 2 December 2013, from Mr Elfman to Mr Oswald-Jacobs as follows:
“Hi John.
What do you think? Can you give our client a written opinion that we do not believe there is a case to get out of the contract to cover us and at the same time still prepare a letter to the Vendor's solicitors claiming that we can get out due to misrepresentation etc. or should I tell him to go elsewhere?
Regards.
Geoff”.
The second email was Mr Oswald-Jacobs’ reply of the same day, as follows:
“Geoff
I don't think there is any need at this stage to tell him to go elsewhere. I guess that would only be necessary if, having received my opinion, he instructs you to inform the vendor that he has rescinded the contract. Even in that event you would not necessarily have to tell him to go elsewhere provided you have made your advice very clear to him, which of course we would ensure that you did, to the effect that pursuing the course that he instructed you to pursue (i.e. informing the other side that he had rescinded the contract) would most likely result in him having to pay substantial damages in addition to the forfeiture of the 10% deposit.
In any event, for the moment what I suggest that you do is send a letter to McMahon Fearnley along the following lines:
We refer to your letter dated 28 November 2013.
Our client is currently obtaining counsel's opinion in relation to this matter. We will inform you by this Friday 5 December 2013 whether or not our client intends to rescind the Contract of Sale.
You would of course be aware that Special Conditions 2 to 4 of the Contract of Sale will not assist your client if in fact either he or his agent have engaged in misleading and deceptive conduct or made misrepresentations to our client.
Let me know if you want to discuss the above, and in the meantime I will get the written opinion to you as soon as possible.
Cheers
OJ”.
The letter was dated 3 December, from DST to McMahon Fearnley and was in the terms proposed by Mr Oswald-Jacobs’ email.
57 According to Mr Russell’s 5 November 2014 email to Mr Bradley, the DST Correspondence showed that Mr Elfman and Mr Oswald-Jacobs had taken action, in contravention of his instructions, in order “to deliberately mislead the Vendor’s solicitors in relation to those instructions”. He questioned why Mr Bradley had advised counsel and Mr Russell “that the facts were not consistent with my instructions”. Mr Bradley replied that “if there was material in your previous solicitor’s files of which you were unaware, then that was something of which we had no knowledge.”
58 On 3 May 2016, Mr Bradley received a letter from Mr Russell’s new solicitor, Grindal & Patrick, advising that Mr Russell had made a complaint in respect of Aitken Partners’ conduct of his file to the Legal Services Board (“LSB”). On 12 September 2016, the LSB notified Mr Bradley and Grindal & Patrick that the complaint had been closed after a preliminary assessment, and provided reasons for the decision.
59 In February 2016, Mr Russell signed terms of settlement with the vendor under the Newham contract, agreeing to pay the vendor $71,300 in full and final settlement of the proceeding. On 10 December 2015, Mr Russell instituted proceeding CI-15-05833 in this Court against DST. He settled this proceeding on 1 July 2016, accepting $7,600 from DST in full and final settlement of his claims against them. On 26 November 2016, Mr Russell instituted the current proceeding against Aitken Partners and DST. His Honour Judge Saccardo made orders on 21 August 2017 summarily dismissing Mr Russell’s claims against DST.
The issues
60 In his pleadings and during the trial of the proceeding, Mr Russell raised a number of factual and legal allegations against Aitken Partners as well as against DST and the vendor of the Newham property. Noting that Mr Russell represented himself over the course of this proceeding, I have considered each of the matters he raised and have done my best to distil the issues that are central to his dispute with Aitken Partners. To the extent that they are irrelevant to the determination of this proceeding, I have excluded from my analysis his claims about the conduct of anyone other than Aitken Partners. Put at their highest, Mr Russell’s claims against Aitken Partners are as follows:
· On or about 19 December 2013, Aitken Partners breached their duty to provide services with reasonable care and skill by failing to:
o advise Mr Russell that instead of terminating, he could protect his interest in the Newham property by first completing the contract and then bringing a proceeding against the vendor in order to recover any loss and damage arising from the vendor’s alleged misleading and deceptive conduct;
o advise Mr Russell and counsel of the existence of the DST Correspondence on the basis that it was a relevant consideration in Mr Russell deciding whether to terminate the contract; or
o ask Mr Russell whether or not he had the financial capacity to complete the Newham contract. Had such instructions been sought, Mr Russell would have answered in the affirmative and Aitken Partners should then have advised him to complete the contract and thereafter bring a proceeding against the vendor in order to recover any loss and damage arising from the vendor’s alleged misleading and deceptive conduct.
· Aitken Partners’ failure to do any or all of these things caused Mr Russell to suffer the losses particularised in his statement of claim.
Application to amend the statement of claim
61 On the second last day of the trial, and during cross-examination, Mr Russell sought to amend his statement of claim. I explained to Mr Russell the difficulties in doing so at such a late stage, including the likelihood of further delays and increased costs on both sides prior to the resolution of the dispute. I also set out the matters Mr Russell would need to establish before leave to amend could be granted (such as the merits of the proposed new claim), and asked Mr Russell to provide written submissions clearly setting out his proposed amendments. As I understand his oral and written submissions, Mr Russell now seeks to resile from each of the claims set out in the preceding paragraph and reframe his dispute with Mr Bradley as follows:
· If, on 19 December, Mr Bradley had expressed the views in his 4 August letter (and particularly his view that the facts as Aitken Partners knew them did not make it clear that Mr Russell instructed DST to terminate), Mr Russell would not have retained Aitken Partners because it would have been clear to him that Mr Bradley did not believe he had told DST he wanted to terminate the contract at the relevant time.
· Therefore, Mr Bradley ought to have informed Mr Russell that he held these views on 19 December 2013, and advised Mr Russell to seek alternative representation because it was not appropriate for Aitken Partners to act for him.
62 Counsel for Aitken Partners has submitted that leave to amend should be refused, because it would cause unjustifiable further delay and costs, and because the proposed new claim is without merit. The submission relied on Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, and the relevant discretionary factors set out in Namberry Craft v Watson [2011] VSC 136 at [38] and Matthews v SPI Electricity Pty Ltd (Ruling No 6) [2012] VSC 70 at [33]. Aitken Partners submitted in substance that:
· Mr Russell failed satisfactorily to explain the reasons for seeking the amendment at such a late stage, in circumstances where no new facts or issues have come to light;
· the proposed new claim has no merit, as:
o it is based on Mr Russell’s own misconstruction of Mr Bradley’s 4 August letter, which he has interpreted as an admission that Mr Bradley did not, as a matter of fact, believe that Mr Russell gave DST instructions to terminate (rather than Mr Bradley’s legal advice that, from the vendor’s perspective, the documents showed uncertainty in Mr Russell’s actions);
o it is common ground that on 19 December 2013, Mr Bradley gave Mr Russell substantially similar advice in relation to the uncertainty affecting his actions, and Mr Russell continued to engage him for several months afterward; and
o to the extent that the claim is that Mr Bradley should have foreseen in December 2013 that he would have communication difficulties with Mr Russell in August 2014, no basis for this is articulated and it is predicated on hindsight;
· the proposed amendment will cause substantial delay, requiring new pleadings and a new trial, in circumstances where the hearing has already run for two days over the estimated hearing time;
· there will be substantial wasted costs, which cannot be fully addressed by a costs order;
· an amendment and the resulting delays will further prejudice the defendant, Aitken Partners;
· there are adverse case management consequences, in that an amendment will require a further allocation of judicial resources; and
· particularly if the preceding factors are established, allowing the amendment will tend to lessen public confidence in the judicial system.
63 I refuse Mr Russell’s application to amend for all the reasons given in Aitken Partners’ submissions summarised above. In particular, the proposed amended claim has no prospects of success essentially for the same reasons that Mr Russell’s existing claims against Aitken Partners must fail, as discussed below. Mr Bradley’s advice was both sensible and sound throughout the period of his retainer by Mr Russell, particularly in the period between 17 and 20 December 2013. Any suggestion to the contrary is coloured by hindsight and, in any event, misconceived. I also largely disregard Mr Russell’s withdrawal of his existing claims. As noted previously, Mr Russell made these concessions on the fourth day of the trial, while he was being cross-examined. In the circumstances, it was not clear to me that he gave sufficient consideration to the decision to concede his existing case. As such, and to avoid any prejudice to him, I have determined his existing claims as set out below.
Analysis
64 Before commencing my substantive analysis of Mr Russell’s claims, I will briefly explain the circumstances in which the trial of this proceeding concluded. On the morning of the final day of trial, 17 May 2019, Mr Russell emailed my chambers explaining that he was in Beechworth and would be unable to attend court that day. My associate responded by email to both parties, informing Mr Russell that I would treat his email as an adjournment request. If the defendant did not consent to the request, the trial would proceed as scheduled.
65 Aitken Partners’ solicitors responded to my associate’s email stating that they did not consent to the adjournment and Mr Russell was informed that the trial would proceed to its conclusion in his absence. He then emailed my chambers again, seeking the opportunity to make submissions in writing, and I made orders allowing him to do so.
66 Mr Russell provided my chambers with a copy of his closing submissions by email received at 3.32pm on Friday 24 May. In the same email, he also sought to file an affidavit that, in effect, set out the matters he would have cross-examined Mr Bradley on had he been present at the hearing on 17 May 2019.
67 The following Monday, 27 May, Mr Russell sent another email to my chambers requesting that Mr Bradley be required to provide an affidavit replying to his 23 May affidavit, and that he then be given the opportunity to make written submissions in response. My associate replied informing Mr Russell that the trial had already concluded, but that I would consider his 24 May affidavit as well as his written closing submissions dated 22 May in the course of preparing my reasons. I have done so.
Did Aitken Partners’ failure to advise Mr Russell that he could complete the contract and then institute proceedings against the vendor amount to a breach of their duty of care?
68 Aitken Partners have submitted that by the time of the conference with Mr Bradley on 19 December 2013, Mr Russell had made it very clear that he wished to withdraw from the Newham contract. These instructions informed the agreed scope of work set out in Aitken Partners’ engagement letter, which, as a first step, required them to formally terminate the contract of sale and demand the return of Mr Russell’s deposit. In the circumstances, the duty of care Aitken Partners owed to Mr Russell was confined to carrying out his clear instructions, set out in the engagement letter.
69 I agree with this submission. In determining whether Aitken Partners discharged their duty, it is important to avoid the wisdom of hindsight:
“…hindsight is no touchstone in negligence. The standard of care to be expected of a professional man must be based on events as they occur, in prospect and not in retrospect”.[1]
Although it may now be true to say that completing the contract would have resulted in a better outcome for Mr Russell, none of the evidence suggests that Mr Bradley could or should have known this on 19 December 2013, two days after his initial retainer.
[1]Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172, per Megarry J at 185, cited with approval in Goddard Elliott v Fritsch [2012] VSC 87 at [410]
70 The documents show that from at least 20 November 2013, Mr Russell was telling his solicitors (then DST) that he wished to withdraw from the Newham contract. They also show that Mr Russell had made unsuccessful efforts in November to re-negotiate the purchase price, but that this was always contingent on first terminating the existing contract. Mr Russell’s own evidence was that the vendor’s refusal to re-negotiate in November caused him to lose faith and further hardened his feelings toward the property. And as I have noted above, during the trial Mr Russell remained firm in his position that he had never been inconsistent in his desire to withdraw from the contract, either in his communications with DST or with Aitken Partners.
71 Thus, both the documents and the parties’ evidence show that throughout the relevant period beginning at the time of his first contact with Mr Bradley on 17 December 2013, Mr Russell made it clear that he wished to terminate the Newham contract. In my view, it is not open to me to conclude that Aitken Partners breached their duty of care by choosing not to second-guess these unambiguous instructions. This is particularly true in circumstances where Mr Bradley had seen counsel’s draft advice confirming that a valid rescission was arguable on the facts. There was, therefore, no reason at all for Mr Bradley to question Mr Russell’s instructions to terminate.
72 Indeed, there is a high likelihood that had he done so, he would have faced the very criticism that Mr Russell came to direct towards DST. Namely, that Mr Bradley failed to accept that Mr Russell was firm and unequivocal in his instructions that he wanted to terminate the contract. This is reinforced by the evidence that, when Mr Bradley sought during the 19 December conference to advise Mr Russell about the possibility of saving costs by completing the contract and rectifying the defects on the property, Mr Russell immediately made it clear that he was not interested in such a course as he had lost faith in the vendor and simply wished to terminate.
73 Although Mr Russell has not raised the issue, I note that counsel for Aitken Partners has identified in this context the possible application of a “penumbral” aspect to the solicitor’s duty of care. In this regard, counsel cited a number of authorities including Spiteri v Roccisano,[2] AJH Lawyers Pty Ltd v Hamo,[3] and Badenach v Calvert.[4] The question arising from these authorities is whether or not the duty of care required Aitken Partners to look outside the precise functions specified in their retainer in order to advise Mr Russell of any appurtenant legal risks.[5]
[2][2009] VSC 132
[3][2010] VSCA 222
[4][2016] HCA 18; (2016) 257 CLR 440
[5]Badenach v Calvert [2016] HCA 18; (2016) 257 CLR 440, at [57] per Gaegler J
74 While the circumstances in which such an obligation might arise are not well settled,[6] they include factual scenarios where:
[6]Spiteri v Roccisano [2009] VSC 132, at [52]
· as a matter of contractual interpretation, advice was not given on commercial matters that were “inextricably interwoven” with the legal issues the solicitor was engaged to advise on;[7] or
· the tortious duty of care, ordinarily set by the terms of the retainer,[8] is expanded because, in the circumstances of a particular case, it is necessary to take positive steps beyond the specific terms of the retainer in order to avoid a real and foreseeable risk of economic loss being sustained by the client.[9]
[7]Amadio Pty Ltd & Anor v Henderson (1998) FCR 149 at 215
[8]Badenach v Calvert [2016] HCA 18; (2016) 257 CLR 440, at [16] per French CJ, Kiefel and Keane JJ
[9]AJH Lawyers Pty Ltd v Hamo [2010] VSCA 222, at [23], citing Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 583-5
75 Counsel for Aitken Partners submitted that in this case there is no prospect of expanding the scope of the contractual terms of the retainer through the notion of a penumbral duty of care. I agree. As noted above, Mr Russell’s instructions to terminate were supported by Mr Oswald-Jacobs’ advice that his rescission was arguably valid. Thus in giving these instructions and entering into the retainer, Mr Russell opted for one of a number of available options. Unlike the circumstances in which a penumbral duty might come into existence, the option chosen did not involve any appurtenant legal risk beyond the possibility that a court might take a differing view – which Mr Russell had already been warned of by DST and Mr Oswald-Jacobs. Further, on the facts as Mr Bradley knew them on 19 December 2013, there was no “real and foreseeable risk of economic loss” (other than the loss arising from an adverse court order) if Mr Russell was not advised to complete the contract contrary to his explicit instructions.
If there was a breach, did it cause Mr Russell to suffer any loss?
76 Even if I am wrong about Aitken Partners’ conduct not amounting to a breach, I am satisfied that Mr Russell has failed to establish that any such breach was a cause of any of his asserted loss. Mr Bradley’s alleged negligence was in failing to advise Mr Russell that, instead of terminating, he should “protect his interest”[10] in the Newham property by first completing the contract and then suing the vendor. According to Mr Russell, had Mr Bradley given this advice, he would not have suffered losses including and stemming from the loss of the opportunity to purchase the Newham property.
[10]Statement of claim, paragraph 25
77 Where a defendant’s negligence consists in failing to warn the plaintiff, the plaintiff must show on the balance of probabilities that he would have responded to the warning in a manner that would have avoided the harm.[11] For example, in Quigley v the Commonwealth,[12] Stephen J (with Mason and Aickin JJ agreeing) held that if it is improbable that the plaintiff would have used a particular safety feature, it is not negligent for the defendant to fail to supply it. Similarly, causation was not made out in Commissioner of Main Roads v Jones,[13] on the basis that it was very unlikely that a reduced speed limit sign would have caused the respondent to reduce the speed of his vehicle, thereby avoiding his injuries.
[11]Rosenberg v Percival (2001) 205 CLR 434, [24]-[25], [87], [154]
[12](1981) 35 ALR 537, at 539
[13](2005) 79 ALJR 1105; 215 ALR 418
78 Whether or not the plaintiff would have responded to the defendant’s warning in a manner that avoided the danger is to be tested subjectively.[14] But despite the fact that the test is subjective, in order to avoid a hindsight bias, the reliability of a plaintiff’s evidence as to what the plaintiff would have done is to be “determined by reference to objective factors, particularly the attitude and conduct of the plaintiff at or about the time when the breach of duty occurred”.[15] Courts must also consider the reasonableness of the plaintiff’s evidence as to how the plaintiff would have acted. This is because “most plaintiffs will genuinely believe that, if he or she had been given an option that would or might have avoided the injury, the option would have been taken.”[16]
[14]Wrongs Act 1958 (Vic) s51(3)
[15]Chappel v Hart (1998) 195 CLR 232, at 246 n 64; Rosenberg v Percival (2001) 205 CLR 434, [89] – [91]
[16]Ibid
79 In this case, Mr Russell’s unwavering position throughout the trial was that, at the relevant time, he wished to withdraw from the contract and have his deposit returned to him before he would consider any other options (such as re-negotiation). His belief that DST was not taking these instructions seriously was the source of much of his strife with that firm. Further, after deciding that he wished to withdraw, he was resistant to DST and Mr Oswald-Jacobs advising him of the possibility that he might incur loss if a court did not agree that his rescission was valid.
80 On these facts, I am unable to conclude on the balance of probabilities that Mr Russell would have accepted any advice from Mr Bradley that he should complete the contract and then pursue a claim against the vendor. Indeed, I am satisfied that it is highly likely on the evidence of Mr Russell’s attitude to the Newham contract as at December 2013, that he would have refused to act on any such advice.
Did Aitken Partners’ failure to advise Mr Russell and counsel of the existence of the DST correspondence amount to a breach of their duty of care?
81 The first thing to note in relation to this issue is that Mr Bradley did not receive Mr Russell’s complete file from DST (which included the DST Correspondence) until the morning of 20 December 2013. He therefore did not have the benefit of reviewing the DST Correspondence until the day after his conference with Mr Russell on 19 December, in circumstances where his instructions following that meeting were to serve the notice of termination as a matter of urgency. Thus, for any claim of negligence in relation to the disclosure of the DST Correspondence to succeed, Mr Russell must establish that Aitken Partners had a duty to alert him to the DST Correspondence even after receiving clear instructions from Mr Russell that he wished to withdraw from the contract, and after reaching the justifiable view that a formal termination notice would need to be prepared in order to accomplish this.
82 Aitken Partners have submitted that they did not have a duty to advise Mr Russell of the existence of the DST Correspondence for two reasons. First, taken as a whole, the DST Correspondence was irrelevant to the terms of Aitken Partners’ retainer. The internal email communication between Mr Elfman and Mr Oswald-Jacobs dated 2 December 2013 went only to Mr Elfman’s ethical concerns about telling the vendor Mr Russell was entitled to rescind in circumstances where he was unsure about the legal validity of that position. By the time Mr Bradley received the documents, this issue had been resolved by Mr Oswald-Jacobs’ advice that there were valid grounds for Mr Russell to rescind. Further, the 3 December 2013 letter from DST to McMahon Fearnley was entirely consistent with Mr Bradley’s advice that the documents did not make it clear Mr Russell had terminated the contract. Therefore, this letter did not require any special consideration relative to the other documents passing between DST and the vendor.
83 Second, and in any event, there was no way for Mr Bradley to know that Mr Russell had not already seen the 3 December letter to McMahon Fearnley. Accordingly, failing to bring the DST Correspondence to Mr Russell’s attention did not amount to a breach of Aitken Partners’ duty to provide services with reasonable care and skill.
84 I agree with these submissions. I also note that, during cross-examination, Mr Russell conceded that the DST Correspondence was irrelevant for the reasons listed above, and that Mr Bradley could not have known he had not seen the 3 December letter to McMahon Fearnley. It became obvious over the course of his evidence that Mr Russell’s primary concern in bringing this claim was that Mr Bradley had kept the DST Correspondence from him because (according to Mr Russell) Mr Bradley had formed the view that Mr Russell had not, in fact, instructed DST to terminate. On being asked whether he agreed that the 3 December letter was consistent with the rest of the correspondence, Mr Russell said yes and then continued:
“It confirmed [Mr Bradley’s] view that the facts as he could see them made it clear to him that perhaps I did not instruct Elfman to terminate the contract. […] That’s my concern. […] The critical issue was there was a conflict between me and Mr Bradley as to acceptance of my instructions to him as to the facts of the case.”
85 As I have stated above, this misses the point. The evidence does not suggest that Mr Bradley was ever concerned about whether or not Mr Russell in fact wished to terminate the contract. Rather, after reviewing the documents made available to him between 17 and 19 December 2013, Mr Bradley reached the conclusion that from the vendor’s perspective, Mr Russell’s purported termination was uncertain. And it was on this basis, after receiving Mr Russell’s clear instructions that he wished to withdraw from the Newham contract, that Mr Bradley advised him it would need to be formally terminated as soon as possible in order to avoid any further uncertainty. As Aitken Partners have correctly submitted, the DST Correspondence was entirely irrelevant to that objective. In the circumstances, I consider that Aitken Partners’ duty of care did not extend to alerting Mr Russell to the DST Correspondence, and therefore their failure to do so did not amount to a breach.
If there was a breach, did it cause Mr Russell to suffer any loss?
86 Having reached the conclusion that there was no breach, it is unnecessary for me to determine the issues of causation and loss in respect of this claim. However, I note that Aitken Partners have submitted that they are not responsible for the losses claimed by Mr Russell in circumstances where “he has ventilated the claims he wished to make against the vendor and David Stagg Tonkin, and regardless of the existence of the 3 December letter, the contract was terminated either by his own actions on 31 October 2013 (prior to the Defendant’s retainer) or alternatively and at the latest, 20 December 2013, or it was rescinded pursuant to the vendor’s Notice of Default and Rescission on 2 January 2014”. I agree. I also note that this claim is affected by many of the same issues in relation to hindsight that are discussed above. Even if Mr Russell had been shown the DST Correspondence, it is not at all clear on the facts that he would have chosen to complete the Newham contract.
Did Aitken Partners’ failure to ask Mr Russell about his financial capacity to complete the contract amount to a breach of their duty of care?
87 Over the course of the proceeding, Mr Russell repeatedly expressed his frustration with what he saw as Mr Bradley’s suspicion that he lacked the financial capacity to complete the contract. According to Mr Russell, this suspicion was borne out by Mr Bradley’s advice not to join DST to the vendor’s proceeding on the basis that they might raise this issue and complicate Mr Russell’s claim against the vendor. However, during cross examination, Mr Russell agreed that he did not take issue with this advice, except in so far as it disclosed the existence of a suspicion, on Mr Bradley’s part, that as a matter of fact Mr Russell lacked the financial capacity to complete the Newham contract.
88 For his part, Mr Bradley’s evidence was that he did not, at any stage during Aitken Partners’ retainer or otherwise, express to Mr Russell the view that he did not think Mr Russell had the financial capacity to complete the contract of sale in respect of the Newham property. He said that he “had no information concerning, and no means of ascertaining Mr Russell’s financial position”. Indeed, it was Mr Russell’s own instructions about the existence of the caveat that formed the basis for Mr Bradley’s concern that an alleged lack of funds might be used by DST against Mr Russell if DST were joined to the vendor’s proceeding. During cross-examination, Mr Russell accepted that this was a reasonable conclusion for Mr Bradley to draw from his instructions.
89 Partly as a result of these admissions, it was difficult to situate this claim within the framework of professional negligence, in circumstances where Mr Russell did not dispute any aspect of the advice he received. At its highest, Mr Russell’s claim appears to be founded on a belief that Mr Bradley’s asserted negative view as to his financial position was the reason why Mr Bradley did not advise him to complete the Newham contract. In his written submissions, Mr Russell argues that Aitken Partners ought to have sought instructions as to his financial capacity to complete the contract and then states:
“If the Plaintiff did not need the proceeds of sale [of the Bayswater property]…then Mr Bradley should have advised the Plaintiff that he may, in that case, be advised not to formally terminate the Contract, and that, instead, he may want to complete the purchase of the Newham farm, and thereafter bring a proceeding against the Vendor to recover his loss and damage caused by the Vendor’s misleading and deceptive conduct”
90 Aitken Partners have submitted that under the terms of their retainer, there was no obligation to seek instructions about or give advice on Mr Russell’s financial capacity to complete the contract. I agree. Even setting aside the fact that the evidence does not establish Mr Bradley ever held such a negative view, Mr Russell’s argument is misconceived. As discussed above, Mr Bradley’s advice during the relevant period in December 2013 was given on the basis of Mr Russell’s clear instructions that he wished to withdraw from the Newham contract because he had lost faith in the vendor. Whether or not Mr Russell was in fact able to complete the contract was irrelevant to this objective. In my view, Aitken Partners did not breach their duty to Mr Russell. In the circumstances, it is unnecessary for me to make any findings on causation or loss in relation to this claim.
91 As noted above, I will dismiss Mr Russell’s application to amend and give judgment for the defendant in the proceeding. Subject to further submissions on the question of costs, I will order that the plaintiff pay the defendant’s costs of the proceeding on the standard basis, in default of agreement.
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Certificate
I certify that these 35 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 2 August 2019.
Dated: 2 August 2019
Shakti Nambiar
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