Simmons v Story
[2001] VSCA 187
•26 October 2001
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 6711 of 1995
| JOHN BRIAN SIMMONS and WESSEX CHEMICALS PTY. LTD. | |
| Appellants | |
| v. | |
| DAVID STORY | Respondent |
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JUDGES: | WINNEKE, P., PHILLIPS and BUCHANAN, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATES OF HEARING: | 21 and 22 May 2001 | |
DATE OF JUDGMENT: | 26 October 2001 | |
MEDIUM NEUTRAL CITATION: | [2001] VSCA 187 | |
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Contract – Retainer by client of solicitor – Whether evidence sufficient to prove implied retainer – Finding by trial judge that evidence failed to prove implied retainer upheld.
Appellant seeking to raise issues neither pleaded nor argued before trial judge – Circumstances in which appellate court will entertain and decide such issues discussed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr. M.D.G. Heaton, Q.C. and Mr. P.J. Hannan | Henty Jepson & Kelly |
| For the Respondent | Mr. P.J. Riordan | Middletons Moore & Bevins |
WINNEKE, P.:
The Background
The first appellant John Brian Simmons (“Simmons”) is an industrial chemist. In or about 1980 he was the controlling director of and major shareholder in a company called Wessex Chemicals Pty. Ltd. (“Wessex”) which imported industrial chemicals into Australia for use by a variety of industries. Wessex, the second appellant, traded successfully throughout the 1980’s and, by 1988, its business attracted the interest of investors who wished to buy it. Throughout this period Wessex engaged the services of a Mr. Tony Shirley (“Shirley”) as its accountant. Shirley practised, under the name and style of “A.J. Betts”, from an office in Moonee Ponds. He did the accounting work for Wessex and, from time to time, gave advice to Simmons on matters relevant to his professional expertise. Wessex had its head office at premises in St. Kilda Road, Melbourne and, occasionally, Simmons would consult with Shirley in St. Kilda Road. At all relevant times Simmons lived in Gisborne to the north west of Melbourne. In the latter part of the 1980’s, Shirley conducted his practice on one day a week from a room in Gisborne which was part of premises occupied by solicitors Story & Telford in which David Story (the respondent to this appeal whom I shall call “Story”) was the sole practitioner. Again from time to time Simmons would consult with Shirley at these premises. In the action from which this appeal emanates, which had been commenced in 1995, Shirley had been named as a defendant. When the trial of the action commenced in the latter part of 1999, Shirley had become “a man of straw” and could not be located. Accordingly, the action proceeded against Story alone and no claim was pursued against Shirley, although – as shall become apparent – his absence was conspicuous and left large gaps in the evidence.
In 1988 an investment company called Forteoh Investments Pty. Ltd. wished to buy the business of Wessex. Negotiations were conducted between the managing director of Forteoh (Mr. Gooie) and Simmons, who enlisted the aid of his accountant Shirley. The negotiations were successful and, in December 1988, “heads of agreement” were drawn and signed. The agreement reached related not only to the price to be paid for the business but also to the retention of the services of Simmons as manager of the new company (to be known as “Wessex Chemical Industries” or “WCI”) for a period of three years. Simmons, on one view of the evidence given at trial, was a man who liked to conduct his own negotiations and used solicitors only when needed or when so inclined. In January 1989 Shirley introduced Simmons to Story who was engaged to draw the necessary documents to formalize the agreement for the sale of the business of Wessex and the service agreement in favour of Simmons. For reasons which are not abundantly clear from the evidence at trial, those agreements were not executed until 30 June 1989. Simmons instructed Story not to attend the settlement, saying that he would take care of that matter himself. It is, however, appropriate to record that, during the month of June 1989, Simmons instructed Story to make an application on behalf of his wife and himself, to secure the guardianship of his wife’s niece.
In June 1989 Simmons consulted Shirley at his St. Kilda Road office. Simmons, who described this period as “the high point in my life”, discussed with Shirley the prospect of investing the monies which were to come to him “in a new business”. Shirley suggested two such “prospects”. One related to an investment, in partnership with another investor, in the development of the Excelsior Hotel. The other related to the acquisition of an interest in what was described as a “picture-framing business” carried on in North Melbourne by a small company known as S.&.T. Marketing Pty. Ltd., for which Shirley had, over several years, been the accountant. It was Simmons’ investment in this latter business which was the subject of the claim at the trial from which this appeal arises. In fact Simmons invested his monies in each of these ventures. Each was to quickly fail, a result which, no doubt, was aided by the volatile financial climate which existed in the late 1980’s and early 1990’s. In respect of the “Excelsior Hotel” venture, Simmons was content to use, so far as required, the services of Messrs. Kliger Katz who were the solicitors for his investing partner. In respect of the “S.&.T. Marketing” venture, he claimed to have retained the services of Story to advise him in respect of the transaction – the issue which was keenly disputed before the trial judge. In the result, as I have said, each of the ventures failed and the fortunes of Simmons rapidly declined and, by 1993, he was declared bankrupt. He was discharged from bankruptcy in 1995, following which he brought these proceedings seeking damages or compensation for alleged breaches of the duties said to have been owed by Story to the appellants.
S. &. T. Marketing Pty. Ltd. (“S&T”) was a company formed in or about 1984. It had two controlling directors and shareholders, Steven Coughlin and Terry Minette. Its business was the acquisition and framing of artistic prints for sale to selected outlets. Coughlin and Minette were experts in the field in which the company operated but were not, so the evidence suggested, astute businessmen. Although, by 1987, the company had a substantial turnover, it also had a large number of outstanding debts. In December of that year it entered into a “debt factoring” agreement with Esanda Finance Corporation (“Esanda”), as security for which it gave to Esanda a mortgage debenture over its assets (including stock). Coughlin and Minette also executed in favour of Esanda personal guarantees. By early 1989, the company was having difficulty honouring its agreement with Esanda because of a “cashflow crisis” generated by its inability to recover debts owing and the high interest rates payable to Esanda. On 23 May 1989 Esanda took possession of the assets of the business through its agent, Mr. Romanis of Romanis & Cant, chartered accountants. At this time Coughlin and Minette were being advised by Shirley, who was their accountant. Each had a belief in the viability of the business of S&T if they could find a “partner” to inject some capital. Upon Shirley’s advice, they determined to negotiate with Esanda, through its agent in possession, to buy back the assets of S&T from Esanda through a “shelf company” called Twilight Trial Pty. Ltd. (“Twilight”) which had been procured for them by Shirley, and of which he was the “director/secretary”. In the latter part of May 1989 they discussed with Romanis the possibility of negotiating a “buy-back” from Esanda. On 30 May 1989 Coughlin wrote a letter to Romanis, which Coughlin said had been drafted by Shirley, offering a sum of $250,000 for the purchase by Twilight of the assets, including stock, of S&T. On the same day, in a “covering letter”, Coughlin wrote to Esanda’s agent, saying (inter alia) that “… [We] are presently negotiating with a third party to purchase a share of Twilight Trial Pty. Ltd., if the latter company is successful in its bid to purchase the assets of S&T”. This letter, too, according to Coughlin, was written on the advice of Shirley. Apparently very little happened during the ensuing two weeks and then, on 15 June 1989, Esanda made a formal demand. This prompted a letter dated 16 June 1989 from Coughlin to Romanis saying that he and Minette were unable to meet Esanda’s demand but suggesting that, with Esanda’s assistance, they were confident that the business of S&T could remain viable. The next matter of consequence which occurred was on 27 June 1989 when a letter was written to Esanda by Story in which he acknowledged that he was acting for S&T. The letter said:
“We have been requested by our client to ascertain from you the exact amounts owing by it to your company. The information is required urgently and we would be pleased if you would telephone our office with the figures … .”
Coughlin and Minette each said that they did not know Story at this time and assumed that Shirley had arranged for the letter to be written. On 6 July 1989, a further letter was written by Story to Romanis, confirming that he was acting on behalf of S&T and Twilight. He further confirmed that Twilight desired to purchase “certain assets of S&T”. He summarized what Twilight was prepared to do in the following form:
“(a) assume responsibility for all leases in relation to equipment;
(b)purchase from S&T all plant equipment and furniture (but not including the Hi-Ace van) for the sum of $30,000;
(c)will purchase all stock at valuation for the consideration of 65% of such valuation and will make payments (sic) the capital sum owing in the sum of $20,000 per month payable in advance;
(d)Twilight will grant to Esanda a registered mortgage debenture and provide Directors guarantees both in respect of the stock acquired pursuant to (c) above … .”
Again, Coughlin and Minette said that this letter “would have been through Shirley’s office” because, as Coughlin said in his evidence, the negotiations with Esanda were taking place through Shirley’s office and that he and Minette were told by Shirley to “more or less keep out of it”.
On 6 July 1989 a further letter was written to Romanis by Story on behalf of S&T. Omitting formal parts, the letter said:
“We further confirm that subject to arrangements being entered into with Twilight Trial Pty. Ltd. for the purchase of certain assets of S&T … that agreements will be entered into between your client Esanda and our client S&T … and our client directors, Coughlin and Minette, that, in consideration of their entering into an agreement with Esanda to fully co-operate and do all things necessary (within reason) to facilitate the collection of debts that an amount up to a maximum of $125,000 will be waived in respect of their indebtedness to Esanda. We further confirm that interest on the debts will cease as of the settlement date but that personal guarantees will continue to be in existence. Would you please confirm these arrangements.”
The agreement referred to in this letter was referred to at the trial as “the co-operation agreement”.
Meeting of 11 July 1989
On 11 July 1989 there was a meeting, summoned by Shirley, at Shirley’s office in Moonee Ponds. It was attended by Simmons, Coughlin, Minette, Story and Shirley. The purpose of the meeting and what was said at it, and by whom, was the subject of much dispute at the trial between Simmons, on the one hand, and Story, Coughlin and Minette on the other. It will be necessary for me to return to these matters hereafter. What was not in dispute were the following facts:
i.That the meeting was called by Shirley to discuss the terms upon which Twilight was to purchase the assets of S&T from Esanda and upon which the appellants were to acquire a 50% interest in Twilight;
ii.That Story attended the meeting at the request of Shirley;
iii.That it was the first occasion upon which Coughlin and Minette had been introduced to either Simmons or Story.
iv.That Shirley “chaired” the meeting, which lasted for approximately an hour.
It is pertinent to note that by the time the meeting of 11 July took place Wessex had changed its name to Busag Pty. Ltd. (“Busag”); although by the time of trial it had changed its name back to Wessex Chemicals Pty. Ltd. (I shall, from time to time, refer to Simmons and Wessex/Busag as “the appellants”.) Following the meeting of 11 July events moved rapidly and, on 28 July 1989, an agreement (“the asset purchase agreement”) was executed by Twilight and Esanda pursuant to which Twilight agreed to purchase the assets (including stock) of S&T from Esanda. Supporting guarantees and a mortgage debenture in favour of Esanda were, on the same day, executed by the directors/shareholders of Twilight.
The Issues before the Trial Judge and her conclusions
The substantial and primary issue between the parties at trial was whether, by and after the meeting of 11 July 1989 (and, in any event, by 28 July 1989 when the asset purchase agreement had been concluded with Esanda), an implication should be drawn that Simmons and Busag had retained Story to act for them as their solicitor to negotiate an acquisition by Busag of a 50% interest in Twilight and the purchase by Twilight from Esanda of the assets of S&T (the “transactions”). It was the claim of the appellants before the trial judge that the evidence should compel her to draw the inference that such a retainer existed. To the contrary, the respondent submitted that no such retainer could be implied from the evidence, and further submitted that the evidence was consistent only with the conclusion that Story was retained after the meeting of 11 July to act on behalf of Twilight to formalize agreements, the terms of which had already been negotiated between the relevant parties. It was submitted on behalf of the respondent that, in concluding such agreements, the appellants had been content to rely, and did in fact rely, solely upon the advice of Shirley and that at no time, either before or after the meeting of 11 July 1989 had Story been retained by the appellants to negotiate the transactions on their behalf.
It should be noted that the issue which the trial judge was asked to determine was not the issue raised on the pleadings which had been extensively amended, pursuant to an order of the Master, in 1998. It had been pleaded that, at all relevant times after January 1989, Story had been generally retained by the appellants in respect of all matters relevant to their interests and expressly in relation to the transactions with which her Honour was concerned. Her Honour concluded that no such general retainer existed; nor was there any evidence to support the existence of an express retainer in respect of the relevant transactions. Those findings are not now in contest.
It should also be said that the evidence upon which her Honour was required to reach her conclusions was far from satisfactory. Quite apart from the fact that Shirley and Romanis were not called[1] - the witnesses on both sides had great difficulty remembering events of 10 years before and, as is apparent from the transcript, tended to reconstruct events from documents, which themselves were equivocal in content, and the provenance of which was not always clear. For example, when discrepancies between his answers to interrogatories and his evidence were put to Simmons he replied:
“What I am saying now, my answers to interrogatories is what I remembered at that time, and what I have been doing now is more and more …, my mind becomes attuned to the events of 10 years ago, I am remembering more and more. If that is … inconsistent, then it is inconsistent. But [as] it is, I am just waking up my memory.”
Likewise, Story’s evidence on many matters was vague. He was practising in the Northern Territory at the time of the trial. He said that his file in respect of Twilight had been replete with notes of the meetings which he had with relevant parties; but it appeared that that file had been released by his successor in Melbourne to the directors of Twilight. That file had been lost. It was little wonder that her Honour, in the course of her judgment, had said:
“I note at the outset that the events giving rise to this proceeding are now ten years old (although the proceeding was commenced in 1995) with all that is thereby implied for difficulties of recollection. The difficulties are increased by the unavailability of Mr. Story’s relevant file notes, the reasons for which are not clear to me, but as to which no blame was sought to be attached to any party.”
[1]The respondent called evidence of unsuccessful attempts to subpoena Shirley. There was also evidence that Romanis was “overseas”.
Upon the issue whether, in respect of the transactions referred to, Story had an implied retainer to act for the appellants, the evidence at the trial came from four principal witnesses; namely Simmons, Story, Coughlin and Minette. The appellants also called evidence from an independent solicitor (one McCutcheon) and from an independent accountant (one Kelly). The evidence of the former, so far as it appears from the transcript, was directed to issues of breach and was predicated upon a finding that a retainer existed. The evidence of the latter, insofar as relevant at all, seems to have been directed to the question of how a person in the position of Simmons would have acted if being requested to invest monies in the S&T venture. The respondent called a solicitor (Howie) who, in early 1990, had been approached by Simmons to give advice in respect of a claim against Shirley. It will be necessary for me to return to his evidence hereafter. The evidence given by the four principal witnesses, whom I have mentioned, was directed towards a number of matters including whether, by the date of the meeting of 11 July 1989, a concluded bargain had been struck between the relevant parties, the role played by Story at that meeting, and the role which he was asked to play following the meeting. There was a marked divergence between the evidence given by Simmons on the one hand and Story, Coughlin and Minette on the other. Simmons said that, by the time of the meeting on 11 July 1989, no concluded bargain had been made between him, on the one hand, and Coughlin and Minette, on the other, as to the terms upon which he and Busag were to acquire an interest in Twilight or the terms upon which Twilight was to acquire the assets of S&T from Esanda; that he was looking to Story to advise him and Busag, as their solicitor, as to the soundness of their participation in such transactions, including advice as to how much they should be prepared to invest, the manner in which the assets and stock of S&T should be valued, which assets of S&T should be leased, and the terms upon and by which his relationships with Coughlin and Minette should be governed. Simmons said that he was also looking to Story to advise him of relevant “financial details” as to trading and profit and loss statements of S&T. On the other hand, Story said that he did not have a retainer – and never had one – to advise Simmons and Busag in relation to any of these matters; that he attended the meeting of 11 July at the request of Shirley; that he was not acting on behalf of any of the interested parties at the meeting, and had told them so; that he attended the meeting on the basis that a concluded agreement had been reached between Simmons, Coughlin and Minette as to the terms upon which Twilight was to purchase the assets and stock of S&T from Esanda, and upon which the appellants were to acquire an interest in Twilight; and that he was at the meeting as prospective solicitor for Twilight to formalize the agreements which had been reached between the parties once those parties had assented to those terms at the meeting. Story said that he had taken no formal part in the meeting of 11 July, a meeting which was conducted by Shirley. He said that it was apparent to him that the parties were agreed upon the terms on which Simmons and Busag were to acquire a 50% interest in Twilight and on which Twilight was to purchase the assets and stock of S&T from Esanda. He was not asked to advise, nor did he give advice to, Simmons on the matters alleged by Simmons. He was thereafter engaged by Twilight to put the agreements “in place”. In accordance with his instructions he had engaged in correspondence with Esanda’s solicitors (“Corrs”) whose responsibility it was to draft the relevant sale agreements. By approximately 21 July 1989 Corrs had drafted and sent for his attention the draft agreement of sale (i.e. the “asset purchase agreement”) and also draft documents of guarantee and indemnity to be executed by each of the directors/shareholders of Twilight; namely Simmons, Coughlin and Minette. Corrs told him that Esanda required a “solicitor’s certificate” certifying that he (Story) had explained the content of the guarantee and indemnity to each prospective guarantor. The agreement had been drafted upon instructions apparently in the possession of the solicitors for Esanda. Thereafter, on 28 July 1989, he arranged for the documents prepared by Corrs to be executed by the relevant parties. Coughlin and Minette gave evidence which generally supported the evidence of Story in respect of these matters. In particular, each said that it was Shirley who had been instrumental in advising them before the meeting of 11 July; that it was he who had found and introduced Simmons as their “prospective partner”; that the terms of their bargain had been finalized before the meeting of 11 July; and that Story had said, at that meeting, that he was not acting for any of the individual persons present at the meeting. Minette said that Story had also told the persons present that they should seek independent advice if they needed it. When, thereafter, disputes had arisen between Simmons and Busag, on the one part, and Coughlin and Minette, on the other, in the implementation of their agreements, Story had referred them to independent solicitors. Those disputes had arisen, according to Coughlin and Minette, because Simmons had conducted the business of S&T without reference to them. Almost immediately he had changed its name to the “Great Australian Picture Co Pty. Ltd.”. Without consulting Coughlin and Minette, he put his wife (and one of her friends) in charge of the day to day operations of the business and negotiated a change in the premises from which the business was conducted. When, ultimately, Simmons sought to negotiate a transfer of all the assets of Twilight to Busag, Coughlin and Minette declined to execute an “employment agreement” and a “loan and consultancy agreement”. The former was an agreement purporting to bind Coughlin and Minette to the business for at least two years; the latter was an agreement acknowledging that the moneys advanced by Busag to the business were interest bearing loans and that Busag’s services were to be provided to the business for a fee.
The Judge’s Conclusions
Her Honour concluded, by the application of established principles[2], that she was not satisfied that the implied retainer asserted by the appellants had been proved. In her Honour’s view an implication of the asserted retainer could not be drawn from the fact that, from time to time between 1989 and 1991, Story had been retained by Simmons and/or Wessex to advise them and/or to draw documents for them in unrelated matters. Her Honour noted that the fact that Story had been retained by Simmons and Wessex in other matters during the relevant period:-
“perhaps renders it more likely that he would have been instructed in the matter in question, [but] it cannot be relied upon to support an inference that that was the case.”
Her Honour noted that Simmons, during the same period, had instructed other solicitors to act for him in other matters, including the Excelsior Hotel matter and a proposed action against Shirley.
[2]cf. Meerkin & Apel v. Rossett Pty. Ltd. [1998] 4 V.R. 54 at 62; Pegrum v. Fatharly (1996) 14 W.A.R. 92.
Her Honour referred to aspects of the evidence of Simmons, on the one hand, and Story, Coughlin and Minette on the other. In particular she referred to the differences in the versions of the respective parties to which I have already referred. It is clear from her conclusions that she did not accept the version of events given by Simmons, but preferred that given by Story, Coughlin and Minette. Specifically she accepted the evidence of Story that, at the meeting of 11 July, he had made it clear that he was not acting for any person present.
The judge also concluded that the contemporary documents, upon which the appellants had relied in support of their allegation that there was an implied retainer, were insufficient to satisfy her that such a retainer existed. Following the meeting of 11 July 1989, Simmons sent a hand-written facsimile on 12 July:
“ABS/Story & Telford.
Attention: Tony Shirley
From: John Simmons.
Reference: Twilight Pty. Ltd.”
A.B.S. are the initials of Shirley. This facsimile was addressed to the “fax number” of the office which was maintained by Shirley at the Gisborne premises of Story & Telford. The body of the facsimile was as follows:
“Please confirm the following. Busag gets 50% of TWILIGHT if it meets the following financial obligations -
(1)pays Esanda for office-plant-equipment which is being held as security by S&T - $30,000.
(2)on settlement with Esanda, Busag pays a further $20,000 for stock and guarantees to Esanda by way of a morg. deb. and personal guarantees to Esanda to purchase the balance of the stock at 65% of actual costs within the following 12 months at a minimum of $20,000 per month.
(3)supply sufficient working capital to pay for lease payment and other expenditure for next 3 months or until sufficient income is received by Twilight to be self-supporting. This capital is only a loan and will incur interest and will be paid back when co. has enough working capital to be self-sufficient.
Before Busag signs the agreement with Esanda it is to be confirm (sic) that –
(1)J. Simmons becomes chairman of the Board which consists of 4 directors.
(2)Esanda-Custom Credit agree to assign the leases for equipment necessary to carry on the business.
(3) Lease of factory to be assigned.
(4)that Terry & Steve [i.e. Minette and Coughlin] enter into a contract which would bind them for 2 years, but not stopping Twilight from dismissing them for appropriate reasons.
…
P.S. David; will this arrangement conflict with my service agreement with WCI?”
Before her Honour the appellants had relied on the terms of this facsimile as instructions to Story as to the implementation of terms of the proposed agreement and as confirmatory of their assertion that Story had been retained by them to advise them in respect of the transactions. Her Honour did not accept that the document “pointed towards” such a retainer but, if anything, suggested the contrary. In her view the document was principally directed to Shirley and the post-script which was addressed to Story was related to an entirely different matter; namely the Wessex “service agreement” in respect of which Story had been retained. Indeed her Honour regarded the document as intended for Shirley “who was the initiator of the transactions”. She said that, accordingly, she did not read the document:
“as necessarily indicating that, at the time, Mr. Simmons had it in mind that Mr. Story was acting as his solicitor in relation to the S&T transactions; or that Mr. Story would have received it on that understanding.”
Her Honour then considered and rejected an argument, which had been mounted by Simmons and Wessex, that the fact that Story – at the behest of Esanda – had signed a “solicitor’s certificate” certifying that he was acting independently of Esanda and that he was satisfied that the guarantors (directors/shareholders of Twilight) had understood the guarantee and indemnity which they had executed was a fact pointing towards the existence of the retainer alleged. She said:
“It is to be presumed that the execution of that certificate was a requirement of Esanda. I do not regard that certificate as evidence indicating that Mr. Story was retained, other than for the preparation of the certificate, by any party to either the asset purchase agreement or the guarantee.”
There were further matters raised by the appellants before the judge in support of their submission that an inference ought to be drawn that Story had been retained by them to advise them in respect of the relevant transactions. In particular, the appellants referred to unexecuted agreements purporting to contain the “loan and consultancy” agreement between Simmons and Busag of the one part and Coughlin and Minette of the other part; and the “employment agreement” pursuant to which Coughlin and Minette agreed to bind themselves to the business of Twilight for a period of two years. Her Honour said of these unexecuted documents that their existence:
“does not ground an inference that they were prepared on the instructions of Mr. Simmons on his own behalf or on behalf of Busag. It might have been thought to be in the interests of Twilight that such documents should be prepared.”
In any event these were documents brought into existence subsequent to the execution of the asset purchase agreement.
There were other facts found by her Honour which, in her view, militated against the inference that Story had been retained by Simmons and Busag in respect of the relevant transactions. In particular she referred to the fact that no bill of costs had been rendered by Story to the appellants; indeed the evidence showed that the only bill rendered was a detailed account to Twilight for $4,759 being costs and disbursements “re: Purchase of Assets from Esanda/S&T Marketing Pty.Ltd.”. This, in her Honour’s view, was:
“consistent with [Story’s] evidence that his client in respect of those transactions was Twilight”,
and that, although Story had carried out “extended negotiations” to do with the transactions in question,
“those negotiations are not inconsistent with his having performed them specifically on behalf of Twilight.”
As her Honour said, there was no evidence that Story had rendered a bill to either of the appellants in relation to the transactions or that any advice was given or sent to them in relation to the transactions. Her Honour discounted the propositions which had been put to her on behalf of Simmons that Story was, and should have been seen as, acting on his and Busag’s instructions because it was they who were “putting the money into Twilight” and that, without their money, Twilight could not operate. Her Honour said:
“… the source of Twilight’s finances is not relevant to the question of whether Mr. Simmons or Busag retained Mr. Story to act for them. Twilight was a separate entity with three shareholders; Busag as to 50%; Minette as to 25% and Coughlin’s [trust company] as to another 25%. It had four directors : Mr. and Mrs. Simmons, Mr. Minette and Mr. Coughlin. Acting for Twilight cannot be equated with acting for one of its shareholders and one of its directors.”
For similar reasons, her Honour said that she could not draw the inference which the appellants wished her to draw from the “time sheets” from which Story had prepared his bill of costs to Twilight. These time sheets, which were of course unexplained by the missing file notes, showed that there had been a number of telephone calls to Simmons and other directors of Twilight. Her Honour said that she gained no comfort from the time sheets in determining the issue before her because:
“Simmons was (or was about to become) a director and, indeed, the Chairman of Twilight, and would have every reason in that capacity to speak to the solicitor … representing Twilight in the transactions; as no doubt would Mr. Coughlin and Mr. Minette, as two other directors of Twilight.”
Drawing upon the expert evidence given by the solicitor, Mr. McCutcheon, her Honour said that “it would have been wise” for Story, particularly in the light of the evidence that he had previously acted for Simmons, to have advised him in writing that he was not doing so on this occasion (my emphasis), because such advice (if available) would have put paid to Simmons’ assertion that the retainer alleged had existed. However, her Honour said that, “even were I disposed to find … that such a contract or retainer existed as it will be apparent that I am not”, the evidence of Howie would satisfy her that she could not do so. Howie was the solicitor to whom Simmons had gone in early 1990 to receive advice as to whether he could sue Shirley in respect of the advice given by him to Simmons which had led Simmons to invest in the business of S&T and the Excelsior Hotel venture. Howie, too, had no independent recollection of the circumstances of Simmons’ instructions but he was able to produce a file note of instructions taken in conference from Simmons on 14 March 1990. He also produced a copy letter of 15 March 1990 in which he had enclosed his memorandum of the instructions received the previous day and in which he had requested Simmons to:
“read carefully and advise us of any alterations you would like to make”.
The memorandum of instructions from Simmons to Howie was admitted into evidence. Amongst other things, that memorandum recited:
“He (Shirley) said that he had two deals which were excellent for good capital growth. … The first project was the hotel project and the second was the S&T Marketing project. Shirley told me that S&T Marketing was in a mess but that with good management and the investment of capital the company would give good capital gains. He gave me the Trading, Profit and Loss Statement to 1 April 1989 and a cash flow projection for 12 months from July 1989.
…
On 11 July 1989 Busag Pty. Ltd. (my trust company) paid a deposit of $5,000 … . Shirley had a shelf company known as Twilight Trial Pty. Ltd. which was to be the vehicle by which the assets were purchased from Esanda. I had 50% of the shareholding and the new directors were to be my wife and myself. The proprietors of the company S. Coughlin and T. Minette were to remain as Directors and I was to control the Board as Chairman of Directors.
I had no solicitor for the deal and was being advised totally by my Accountant, Tony Shirley. The solicitor for Twilight Trial was David Story and, on 12 July 1989, we spoke with him and he organized the agreement with Esanda …”.
During the course of the trial this memorandum was called to the attention of Simmons. When it was put to him that his claim to Howie that Shirley had given him the trading and profit and loss statements of S&T to 1 April 1989 was inconsistent with his evidence to the court, Simmons replied:
“Again, up to that stage, the facts are wrong. … I could not have told him that.”
He went on to say that he had “never seen” such a statement. Again, when he was asked to comment on the statement that he “had no solicitor for the deal and was being advised totally by … Shirley” he responded:
“Up to that point of the meeting, the 11th of July … that is what I was trying to infer.”
In the course of her reasons, her Honour referred to these matters and concluded:
“To put it kindly, the statement by Mr. Simmons that he ‘had no solicitor for the deal’ was made only 9 months after the events in question, and is likely to be based on a more accurate recollection of the situation than is Mr. Simmons’ evidence to this court. When that statement was put to Mr. Simmons, he initially attempted to deny that he had had a conference with Mr. Howie on 14 March 1990. He later said that in making the statement to Mr. Howie he had meant that he had not had a solicitor acting for him in the transactions until the meeting of 11 July 1989. He agreed that at that time he did not think that Mr. Story had done anything wrong.
I am satisfied that when Mr. Simmons consulted Mr. Howie in March 1990, he did not believe that Mr. Story had been acting for him or Busag at any relevant time in respect of the transactions. Had he held that belief, he would have asked for advice as to what action he could take against Mr. Story as well as against Mr. Shirley. I have no reason to doubt the accuracy of Mr. Howie’s memorandum.”
The Appeal
The Notice of Appeal contains no fewer than 48 “grounds”. Many of those grounds are argumentative in the sense that they challenge almost every finding which the judge made and assert that she should have made contrary findings consistent with a conclusion that the only reasonable inference open was that the “transactions retainer” asserted in fact existed. There is little point in tracing each of these grounds because counsel for the appellants refined them, in the course of argument before this Court, to three principal contentions:
(a)That the judge’s conclusion that she was not satisfied that there was any implied retainer of Story to act for either of the appellants in respect of the transaction was against the evidence and the weight of the evidence. The appellants submitted that, if this Court upheld that ground, the appropriate order was to remit the matter to the trial judge for further findings.
(b)That, in any event, her Honour had found that Story had been retained by Simmons to “explain the guarantee to Simmons” and to provide a solicitor’s certificate accordingly to Esanda; and that such finding as to the existence of a “limited retainer” should have led to an award of damages and/or equitable compensation. It is further claimed (at least in written submissions) that “if the Court concludes that her Honour was correct in rejecting the wider retainer, but upholds this aspect of the appeal, the appropriate order is to enter judgment for the appellants for damages and/or equitable compensation to be assessed”.
(c)That, regardless of the failure of (a) and (b), and accepting the findings made by her Honour, this Court should conclude that Story “owed to the appellants a duty to protect their interests as if he was their solicitor or to advise them that they engage another solicitor”.
Counsel for the respondent strenuously objected to this Court receiving any argument in respect to the matters raised in paragraphs (b) and (c) on the basis that they were intended to raise matters which were neither pleaded nor argued before the trial judge. Indeed, the appellants conceded that neither of the matters raised in (b) and (c) had formed part of the appellants’ case before the trial judge. They submitted, however, that they ought to be entitled to ventilate the matters before this Court on the basis that no miscarriage of justice will flow to the respondent. The respondent contested that submission on the grounds that, if the matters had been raised and argued at trial, the case which he would have presented would have been significantly different from the one which he had in fact presented; that the evidence would have been different; and that the judge would have been called upon to consider the evidence which was, and would have been, led in a manner different from the way in which she was in fact called upon to consider the material before her. The appellants in fact conceded, as they had to, that the matters which they wished to raise under paragraphs (b) and (c) were not matters which had been pleaded or argued before her Honour; indeed, in respect of the matters raised in (c), they conceded that they had applied to the Master by summons filed on 16 September 1998 for leave to amend the statement of claim to plead such a claim; that the Master had refused their application for leave to so amend (at the same time as he had dismissed the respondent’s application to dismiss the appellants’ claim for want of prosecution); that they (the appellants) did not seek to appeal against the Master’s orders; and that at trial they did not seek the judge’s leave to amend their statement of claim; nor advance any argument in support of the proposition which they now wish to make. They concede that, to do so, they need this Court’s leave to amend their statement of claim in the form which the Master refused in 1998 and to amend their notice of appeal accordingly. Such application for leave was made in respect of the matters referred to in paragraph (c) but not in respect of the matters raised by paragraph (b). Counsel, in fact, advanced no oral argument to this Court in support of their application to amend the pleadings to raise the matters reflected in paragraph (c), but said that they were content to rely upon their written submissions. I would refuse both the application for leave to amend the statement of claim and the application for leave to amend the notice of appeal. Likewise I would reject the grounds of appeal which seek to raise the matters referred to in paragraph (b) (above). I will defer my reasons for doing so until I have addressed the grounds encompassed by paragraph (a).
Should the judge have inferred a retainer as asserted by the appellants
I have traversed in some detail the evidence which was before the trial judge, because it has necessary relevance to the grounds which assert that the judge’s conclusion declining to find the existence of the implied retainer was against the evidence and the weight of the evidence. In substance, it is submitted that her Honour should have found the existence of such a retainer because it was a necessary inference from the proved facts. There is no doubt that the Court can infer the existence of a professional retainer if the conduct of the parties, viewed in the light of the surrounding circumstances demonstrates, to the requisite standard of proof, that such a retainer exists[3]. As Ipp, J. said in Pegrum v. Fatharly (supra at 95):
[3]cf. Groom v. Crocker [1939] 1 K.B. 194 at 222 per Scott, L.J.; see also Integrated Computer Services Pty. Ltd.v. Digital Equipment Corporation (Aust) Pty. Ltd. (1988) 3 BPR 11,110 at 11,117 per McHugh, J.A.; Australian Energy Ltd. v. Lennard Oil N.L. [1986] 2 Qd.R. 216 at 237 per Thomas, J.)
“A contractual relationship of solicitor and client will therefore be presumed if it is proved that the relationship of solicitor and client existed de facto between a solicitor and another person. Upon proof of that kind it would not be necessary to prove when, where, by whom or in what particular words the agreement of retainer was made. Applying the rule expressed by Thomas, J. in Australian Energy Ltd. v. Lennard Oil N.L., the de facto relationship of solicitor and client has to be a necessary and clear inference from the proved facts before a retainer will be presumed.”
In Meerkin & Apel v. Rossett Pty. Ltd. (supra at 62), Charles, J.A. referred to this passage in the judgment of Ipp, J. in Pegrum’s case, and said that:
“If the rule as so expressed means no more than that one has to find a necessary inference, on the balance of probabilities, of the kind suggested, I have no difficulty with it.”
However, Charles, J.A. noted that Ipp, J., in formulating the rule, had made use of the established formula for the implication of terms in a contract, and had applied that formula to the process by which an agreement is to be inferred. He said that if, in so doing, it was being suggested that:
“… a test more stringent than the balance of probabilities was to be used to establish the existence of an inferred or implied retainer, a real question would, with respect, be raised as to whether the test was correctly posed.”
In Integrated Computer Services Pty. Ltd. v. Digital Equipment Corporation (Aust.) Pty. Ltd. (supra at 11,117), McHugh, J.A. said that a contract may be inferred from the acts and conduct of the parties as well as, or in the absence of, their words but added:
“The question, in this class of case, is whether the conduct of the parties as viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an expressed contract.”
These principles make it clear that it is the proved facts in the case under consideration which are required to be examined in order to determine whether a clear inference can be drawn. In this regard the appellants faced problems at trial, as they do on this appeal, because of the nature and quality of the evidence. As I have already noted, the witnesses were speaking from memory of events which were 10 years old; their evidence was clearly based on re-construction in many instances; they had no reliable contemporary records to assist them; and the documents upon which the appellants relied and still rely to provide the surrounding circumstances to support the existence of the retainer are of doubtful provenance, in many instances unexecuted and unexplained – or at least poorly explained – as to when and how they were brought into existence. Furthermore, it is apparent that credit and credibility played a significant part in the findings which her Honour did make. It is apparent from those findings that her Honour did not accept Simmons’ evidence of what occurred at the meeting of 11 July; more particularly his evidence of the role played by the respondent at that meeting. Rather she accepted the evidence of the respondent and his witnesses to the effect that the meeting was a formality to obtain the assent of Simmons, Coughlin and Minette to the terms of agreements which had already been negotiated, through the agency of Shirley, in accordance with which Twilight was to purchase the assets and stock of S&T from Esanda, and Simmons was to purchase a 50% interest in Twilight. It is also clear from her Honour’s findings that she rejected Simmons’ evidence that the respondent had assumed an advisory role at the meeting and that Simmons regarded Story as acting as his solicitor in that role. She specifically found that Story had told the meeting that he was not acting for any person who was at the meeting, but would be prepared to act for Twilight to formalize the agreements if the parties so wished. It also seems to me to be clear from her Honour’s findings that she rejected Simmons’ evidence that he had not been “totally advised” by Shirley in reaching his agreement to participate in the “S&T venture”, that he was “looking to Story” to advise him as to the soundness of “the deal”, and his evidence that the contents of his facsimile of 12 July were instructions to Story and not to Shirley.
Before turning to the arguments made by the appellants in this appeal, it should be noted that there was other evidence before her Honour which tends to support her conclusions. For example, no file was opened by Story for Simmons or Busag in respect of the alleged transactions; nor were any letters of advice sent by him to Simmons, nor were any letters sent to Esanda on behalf of the appellants. No bill was rendered by Story to Simmons or Busag. Simmons had demonstrated his capacity to negotiate agreements without a lawyer; even on 28 July (that is, the day that the agreement with Esanda was finalized), he had written a letter, on Busag’s letterhead, to Shirley as “Director/Secretary” of Twilight setting out his confirmation of the terms of the agreement. It was Shirley who, about a week earlier, had forwarded details of Simmons to Esanda to demonstrate that Simmons was a man of “substance”. It was Shirley who, on 11 or 12 July (and following the meeting) had sent to Esanda on behalf of Simmons and Busag a cheque for $5,000 “deposit” as part payment of the price negotiated for the purchase of S&T assets and stock. Simmons, himself, had conceded in evidence that he knew that Story was acting for Twilight, a fact which he had confirmed to Howie in March 1990.
Notwithstanding the matters to which I have referred in the preceding paragraphs, counsel for the appellants submit that the objective facts established before the trial judge were such as should have led her to the conclusion that, by the meeting of 11 July, and certainly by 28 July 1989,the appellants had retained the respondent to act as their solicitor in respect of the transactions. Indeed, they submitted that the uncontested facts and documents supported the “irresistible inference”, regardless of what was said at the meeting of 11 July, that “at some time before 28 July 1989”, the respondent had assumed the role of the appellants’ solicitor. In support of that submission, counsel pointed to this : that, for some time before 11 July 1989, Story had acted for Simmons and his related entities. Between January 1989 and June 1989 he had drawn documents with respect to the sale of the Wessex business and had accepted a retainer to act for Mr. and Mrs. Simmons in the guardianship application. Against that background, it was submitted that the judge should have found that Simmons was “looking to the respondent” to protect his interests, and that – by 28 July – had assumed the role as the appellants’ solicitor so as to impose upon him a duty to protect their interests and inform them of conflicts which he (the respondent) had or might have had. To that end, counsel pointed to the evidence that the respondent had, between late June and early July 1989 sent letters on behalf of S&T (and Coughlin and Minette) to Esanda and/or Romanis putting proposals for “buying back” the assets and stock of S&T and reducing the exposure of Coughlin and Minette to Esanda pursuant to their personal guarantees.
In the light of the evidence which was before the judge, the matters to which I have referred in the preceding paragraph do not seem to me to lead to the “irresistible inference” for which the appellants contend. Rather those matters seem to me to be quite consistent with the conclusion, to which her Honour came, that the respondent was retained by Twilight to formalize the agreement already negotiated between the relevant parties following the initial offer which had been made to Esanda by Twilight for the acquisition of assets of S&T on 6 July 1989. Many, if not all, of the submissions made to this Court on behalf of the appellants to support their contention of an “irresistible inference” that, by 28 July 1989, the respondent had been retained by them, were a repetition of submissions which had been made to her Honour. The contention to this Court was that her Honour had misconstrued, or failed to accord sufficient weight to, the incontestable evidence before her which should have compelled her to the conclusion that the retainer which the appellants asserted was clearly proven, regardless of the respondent’s statement at the meeting of 11 July that he was “not acting for any person present”. Thus, it was submitted that her Honour had failed to have proper regard to the evidence of Simmons that, by the meeting of 11 July 1989, he did not know of the true state of the finances of S&T; or to the evidence that Story had been negotiating with Esanda to reduce the liability of Coughlin and Minette under their existing guarantees. It was further contended that her Honour had failed to appreciate, and give sufficient weight to, the existence and cause of potential conflicts which arose in Story acting on behalf of Twilight in putting into place agreements said to have been negotiated in respect of the transactions. Thus, it was submitted that, because of conflicts, the so-called “employment” and “loan and consultancy” agreements were not drafted until well after 28 July 1989 (when the agreement with Esanda was executed) and were, as a consequence, never executed. The appellants further submitted that her Honour had failed to apprehend the significance of the fact that the appellants were the sole source of funds for the “buy-back” from Esanda and the contemplated resurrection of the former S&T business. It was submitted that that fact, which the respondent well knew, should have led the judge to conclude that the appellants were “looking to the respondent” to protect their interests and to further conclude that, by 28 July 1989, the respondent had “assumed the role” of the appellants’ solicitor in respect of the transactions.
For my own part, I am not persuaded by any of the submissions to which I have referred in [26] and [27], that the judge was in error in reaching the ultimate conclusion which she did. The appellants bore the onus of proving the existence of the retainer which they alleged. The evidence upon which they sought to do so was, as I have said, far from unequivocal. Apart from the evidence of Simmons himself, and particularly in the absence of Shirley and Romanis, there was very little evidence before the court as to what Simmons knew, or did not know, of the financial health of S&T at the time when he attended the meeting on 11 July 1989. It is, however, clear that her Honour was not prepared to treat Simmons as a credible witness. Thus, she did not accept his evidence that Story had said at the meeting that he was “negotiating with Esanda” or his evidence that Story had not said at the meeting that he was “not acting for any of the persons present”. It is also clear that she did not accept Simmons’ evidence that he knew nothing of the “trading results” of S&T, and that Story had told him that he “could not have access” to them, because she specifically accepted the accuracy of Howie’s memorandum that Simmons had told him on 14 March 1990 that Shirley had given him the trading and profit and loss statements of S&T for the period ending in April 1989.
Against the background of the matters to which I have referred, I cannot accept the submissions, made to this Court, that the judge misconstrued the evidence in a manner which rendered untenable her conclusion that the retainer alleged by the appellants had not been established.
· The fact that the respondent had previously acted for Simmons and Busag in respect of other matters did not compel her Honour to find that he was acting for them on this occasion. Quite apart from her Honour’s acceptance of the evidence that Story had said at the meeting of 11 July 1989 that he was not acting for any person present, there was an abundance of evidence to support her finding that the fact that he had acted for Simmons on other occasions could not ground an inference that he was doing so in these transactions. That evidence included the material that Simmons was accustomed to randomly pick and choose various solicitors for various transactions; or to act for himself, or with the advice of his accountant, in negotiating transactions. He had negotiated, either by himself or with the assistance of Shirley, the sale of the Wessex business to Forteoh; he was content to rely upon his investing partner’s solicitor in respect of his investment in the Excelsior Hotel; he sought Howie’s advice in his quest to recover his losses from Shirley and/or Kliger Katz accruing from his investments in the Excelsior Hotel and S&T; he also appears to have acted for himself in Busag’s unilateral take-over of the business of Twilight in 1990. Indeed, such evidence as was available to her Honour strongly supported the fact that he was looking to Shirley to advise him in respect of these transactions. Her Honour was entitled to find on the evidence, as she did, that by the time of the meeting of 11 July 1989 Simmons and Busag had finalized their agreement with Coughlin and Minette as to the terms upon which the business of S&T was to be purchased from Esanda and the terms upon which Simmons and Busag were to purchase a 50% interest in Twilight; and that Story was to be retained on behalf of Twilight if the parties so desired. Indeed Simmons conceded that he was aware that Story was to be retained by Twilight.
· The fact that, in acting on behalf of Twilight, there was a potential for conflict in Story (if indeed there was) in drafting the “asset purchase agreement” with Esanda and the “employment” and “loan and consultancy” agreements between the directors of Twilight could not of itself ground an inference that the respondent had been retained by Simmons and Busag. It has been said that:
“… the mere acceptance of multiple ‘fiduciary’ engagements or employments is obviously not offensive in itself. It is the staple of the commission agent, the solicitor, the corporate trustee, the company director and the liquidator. The vice condemned by the courts only arises when the fiduciary, by his action or inaction in either or both of two relationships brings about an actual conflict between duties owed in each relationship.”[4]
[4]Finn; Fiduciary Obligations, L.B.C., at 252-3; see also Beach Petroleum N.L. v. Abbott Tout Russell Kennedy (1997) 26 A.C.S.R. 114 at 253 ff.
I did not understand the appellants to be arguing in this case that it was the alleged “potential for conflict” which, per se, grounded the inference which they were asserting. Rather counsel were submitting, as I understood them, that the potential conflicts which later arose between the appellants of the one part and the Coughlin/Minette interests of the other in respect of the “employment” and “loan/consultancy” agreements demonstrated that those parties were not, as at 11 July 1989, in agreement as to the terms of their bargain; that her Honour should not have found that they were; and that because these agreements were designed to protect the interests of the appellants, her Honour should have concluded that, at all relevant times, the respondent was retained to protect those interests. For my own part, I can see nothing in these submissions. These documents were prepared, as I have said, some time after the execution of the “asset purchase agreement” with Esanda. Whether they should have been, consistently with the retainer accepted by Story for Twilight, was not a matter ventilated or relied upon by the appellants at trial. They were not executed because, as Coughlin and Minette said, they were not prepared to execute them at that time, not because they did not represent the terms of their bargain, but because they were thoroughly dissatisfied with the autocratic manner in which Simmons was controlling the business and excluding them, notwithstanding their interest, from any part in it. As the judge said, she had no reliable evidence before her as to who it was that gave instructions for the drawing of the documents, and she was not prepared to find that they were prepared on the instructions of the appellants. That conclusion was supported by the absence of any bill of costs rendered to the appellants and, as her Honour said:
“It might have been thought to be in the interests of Twilight that such documents should be prepared.”
When a dispute did arise in relation to the execution of the agreements, the respondent declined to act further, and referred the respective parties to other solicitors. In my view, her Honour was, on the state of the evidence, entitled to conclude that:
“The existence of those documents does not ground an inference that they were prepared on the instructions of Mr. Simmons on his own behalf or on behalf of Busag.”
· Counsel for the appellants relied upon the fact that the respondent’s itemised bill of costs showed that, between 11 July and 28 July, the respondent had had a number of telephone conversations with Simmons, as he had had with Coughlin and Minette. However, as her Honour was entitled to conclude, they were not inconsistent with the fact that he was acting on behalf of Twilight in doing so. This was at a time when Story was in contact with Esanda’s solicitors who were preparing and finalizing the asset purchase agreement. It was open to her Honour to find that it was consistent with the respondent’s retainer by Twilight that he should be “in touch” with each of Twilight’s directors. The contacts with the various interested persons were included in Story’s bill of costs to Twilight. No bill was rendered to the appellants, nor (as I have said) did the evidence disclose any letters of advice sent to the appellants or letters sent to Esanda’s solicitors on behalf of the appellants.
· Her Honour found that the fact that the appellants were the sole source of finance for Twilight’s “buy-back” from Esanda and for the conduct of the business thereafter was not “relevant to the question of whether [the appellants] had retained the respondent to act for them”. Although the appellants challenged this finding, her Honour was, in my view, plainly entitled to so conclude. As her Honour said Twilight was a separate entity from its shareholders and directors and that “acting for Twilight cannot be equated with acting for one of its shareholders and one of its directors”. The appellants submitted that, because Simmons was the “White Knight”, the judge should have found that it was his interests which needed protection. That submission, in my view, is not sound because it would seem to suggest that Story should have preferred the interests of Simmons over the interests of Coughlin and Minette.
None of the facts or matters to which I have referred in the preceding paragraph, whether taken alone or in combination, are in my view capable of demonstrating that her Honour was in error in concluding that the appellants had failed to establish that the respondent had been retained by them. Contrary to the submissions made on behalf of the appellants, none of these facts or matters appear to have been founded upon “uncontested evidence”; indeed all of them appear to have been drawn from evidence which was very much in contest. Even assuming that they had a firm evidential foundation, they were – as her Honour, correctly, in my view, concluded – equally consistent with the respondent being retained by Twilight. None of them was capable of ousting the inference which her Honour drew, based on facts found or evidence otherwise established, that the appellants were, by 11 July 1989, prepared to enter the transactions upon the advice of Shirley, to the point where Simmons was prepared to instruct Shirley, following the meeting of 11 July 1989, to forward a $5,000 deposit to Esanda (which Simmons described as “an earnest of his goodwill”), and further to instruct Shirley to send to Esanda particulars of his “substance”, without even taking the time to have a look, for himself, at the premises, stock or assets of S&T.
The appellants further submitted that her Honour misconstrued the facsimile which Simmons sent on 12 July, following the meeting on the preceding day. It was contended that her Honour should have reasonably construed this as a set of instructions to Story so that he could “protect the interests of Simmons”. However, in my view, her Honour was entitled to construe the document in the way in which she did. It was marked “to the attention of Shirley” and this was consistent with the other evidence, which her Honour accepted, that Simmons was being “totally advised” by Shirley and was not, in respect of the transactions to which the document referred, being advised by Story. Her Honour was entitled to find – as she did – that it was only the “post-script” in this document which was addressed to the respondent; this being in respect of Simmons’ service agreement with W.C.I. – a matter in which the respondent had been expressly retained by Simmons. Her finding was also supported by the letter (Ex.79) which was sent by Simmons on behalf of Busag as late as 28 July 1989. That was the letter directed to Shirley (as “Director/Secretary of Twilight”) informing him, “following our meeting” of what Simmons understood and “confirmed” were the details of the agreements which had been reached.
Another submission made by the appellants was that her Honour gave too much weight to the evidence of Howie. It was submitted that her Honour’s task of construing the objective facts for the purpose of determining whether or not the asserted retainer could be inferred could not be assisted by what Simmons said to Howie in March 1990, and in particular by his statement to Howie that he “had no solicitor for the deal and was being advised totally by my accountant, Tony Shirley”. Counsel submitted that this was a statement of Simmons’ subjective belief made in the context of instructions being given in the course of seeking advice as to the existence of a claim against Shirley and at a time when he had no cause to believe that Story had done anything wrong.
I do not understand the appellants to have been contending that her Honour was not entitled to use the evidence of what Simmons said to Howie in assessing the credibility of Simmons’ evidence. Thus his statement to Howie that he was being “advised totally” by Shirley had a direct impact on his evidence that he was relying upon Story’s advice as to whether he “should accept the deal”. Further, his statement to Howie that Shirley had given to him the accounting records of S&T for the period up to 1 April 1989 was directly in conflict with his evidence that he had never received such records and no doubt raised a real question in her Honour’s mind about the thrust of Simmons’ evidence that he knew very little about the trading performance of S&T before he executed the agreement with Esanda on 28 July 1989. Although counsel for the appellants, in their submissions to this Court, did not contend that her Honour was not entitled to treat the statement by Simmons to Howie that he “had no solicitor in the deal” as some evidence relevant to the issue of the existence of the alleged retainer, a question arose as to the extent to which the evidence could be used. In substance, it was counsels’ submission that her Honour had attributed too much weight to the evidence.
Where there is no dispute that a contract exists between the parties, and a question arises as to its meaning or proper construction, statements and actions by the parties in the course of negotiations, or thereafter, which are reflective of their intentions and expectations are not receivable because they are superseded by the contract itself[5]. However, where the matter at issue is whether the existence of a contract is to be inferred from the relationship between the parties and the manner in which they conducted themselves, it seems to me – at least where the conduct is equivocal – that a subsequent statement by the party asserting the existence of a contractual retainer that he “had no solicitor” acting for him and was being “advised totally” by his accountant, whilst not determinative, is nevertheless capable of being used by a court at least for the purpose of explaining the relationship at the relevant time and as bearing upon the question whether the party asserting the existence of the contractual retainer had discharged his onus of proof. I would, for my own part, have thought that such statements are, in this case, some evidence of the fact that Simmons had not intended to retain Story as his solicitor for the alleged transactions; a fact which Story was himself asserting. In Air Great Lakes Pty. Ltd. v. K.S. Easter (Holdings) Pty. Ltd.[6], Mahoney, J.A. said:
[5]Codelfa Constructions Pty. Ltd. v. State Rail Authority of N.S.W. (1982) 149 C.L.R. 337 at 352 per Mason, J.; F.A.I. Insurance Co. Ltd. v. Savoy Pty. Ltd. [1993] 2 V.R. 343 at 346 ff., per Brooking, J.
[6](1985) 2 N.S.W.L.R. 309 at 330.
“It is generally accepted that, in determining whether what the parties have done results in a binding contract, their intention is significant. And there is reference in the cases and text books to the question whether, for there to be a binding contract, it is necessary that the parties have an actual or subjective intention to contract … . But questions in that form are, I think, apt to mislead : it is, in my opinion, of more assistance to ask whether actual or subjective intention to contract plays a part in determining whether there is a binding contract, and (if it does) what part it plays.
The proper view is, in my opinion, that the existence of a contract is a consequence which the law imposes upon, or sees as a result of, what the parties have said and done. Actual subjective intention to contract is a factor which the law takes into account in determining whether a contract exists but it is not, or not always, the determining factor.”
In the same case (at 334-5), McHugh, J.A., after referring to the passages in the judgment of Mason, J. in Codelfa, (supra) at p.352, said:
“But I do not think that his Honour was intending to exclude evidence which tends to establish that the parties have or have not made a contract. The remarks of Mason, J. were made in the context of an admitted contract; they were concerned with the materials which can be used to interpret a written contract. The question in this case is, I think, a different one.”
Although these statements of principle were made in a case where the circumstances were different from those which exist in this case, it seems to me that they have application to the issue now being considered. I think her Honour was entitled to use the statements made by Simmons some eight or nine months after the retainer was alleged to have come into existence, namely that he had “no solicitor in the deal” and that he was being “advised totally” by Shirley, as some evidence, in the nature of an admission against interest, that he had not retained or intended to retain Story as his solicitor in the relevant transactions[7]. Furthermore, it does not seem to me that her Honour gave undue weight or emphasis to the significance of that evidence. I agree with the submission made on behalf of the respondent that the statements made by Simmons to Howie were open to be used by her Honour as some evidence which bore upon the issue of whether the contract which the appellants were asserting in fact existed, as distinct from evidence assisting the interpretation of an existing contract. In any event, whether her Honour was right or wrong in relying upon this evidence for this purpose, it could not have altered her conclusion, to which, as she said, she would clearly have come, that the evidence otherwise available to her would not permit the inference of the retainer asserted. The explanation given by Simmons in evidence for his statement to Howie – namely that he meant that Story was not acting for him up to the date of the meeting of 11 July 1989 - was clearly rejected by the judge and was also a matter open to be used by her in assessing Simmons’ credibility.
[7]cf. F.A.I. Insurance Co. Ltd. v. Savoy Pty. Ltd. (supra) at 351; Australian Broadcasting Corporation v. XIVth Commonwealth Games Ltd. (1988) 18 N.S.W.L.R. 540 at 550 per Gleeson, C.J.; Grey v. Australian Motorists & General Insurance Co. Pty. Ltd. [1976] 1 N.S.W.L.R. 669 at 685 per Mahoney, J.A.
The appellants submitted that the trial judge’s finding that the respondent was acting only for Twilight is “a rejection of the notion” that he was acting for Coughlin and Minette, when the evidence showed that he had acted in their interests in effecting the “co-operation agreement” with Esanda to secure a reduction in their liability under the guarantees which they had previously executed as directors of S&T. However, in my view, her Honour’s finding that Story was not retained by Simmons and Busag does not amount to a rejection of the stated “notion”. It was Story’s position that he had acted in the interests of Coughlin and Minette in negotiating the “co-operation agreement”, but there was no evidence to show how this represented a conflict with his obligations to Twilight or how any such conflict could give the appellants a cause of action. The submissions made by the appellants in respect of these matters do not, as it seems to me, go to the issue of whether the judge was correct in finding that the respondent had not been retained by Simmons and Busag to act for them in the relevant transactions. Rather they seem to me to be assertions that, if such a retainer had existed, there was some evidence upon which the appellants might have been able to rely to prove against the respondent that he was, or may have been, in breach of it.
It will be apparent from what I have said that I am not persuaded that her Honour was in error in concluding that there was no retainer of the respondent to act for either of the appellants in respect of the transactions. Having regard to the views which I have expressed – namely that her Honour’s conclusion was, to a considerable extent, based on her assessment of the witnesses and their credibility, particularly that of Simmons – her Honour enjoyed a considerable advantage in making findings of fact and drawing inferences from the evidence which this Court does not share[8]. There is nothing in her Honour’s reasons which suggests to me that she has acted on evidence which was inconsistent with facts which she found or that her conclusion was inconsistent with facts otherwise incontrovertibly established by the evidence.
The “limited guarantee retainer”
[8]Powell v. Streatham Manor Nursing Home [1935] A.C. 243 at 255, per Lord Atkin; Warren v. Coombes (1979) 142 C.L.R. 531 at 551-2; Devries v. Australian National Railways Commission (1993) 177 C.L.R. 472 at 479.
By grounds 27 and 28 of their notice of appeal the appellants have raised a matter which they concede was neither pleaded nor argued at trial. The grounds were in the following form:
“27.Having found Mr. Story was retained by (inter alia) Mr. Simmons to prepare the solicitor’s certificate her Honour erred in not finding that involved Mr. Story being retained to advise and explain the guarantee and indemnity (of) 28/7/1989.
28.Having found that Mr. Story was retained in respect of the guarantee by the guarantors, including Mr. Simmons, for the preparation of the solicitor’s certificate, her Honour failed to find or consider Mr. Story’s fiduciary and other duties and Mr. Story’s conflict of interest in also acting for Messrs. Coughlin and Minette … in reducing their liabilities as guarantors of S&T to Esanda by $125,000 and the consequences thereof not only so far as Mr. Simmons was concerned but the ramifications for Busag in all of the transactions if the conflict of interest had been explained to Mr. Simmons.”
In the course of their submissions, counsel for the appellants submitted that the Court should entertain these grounds, in the event that it rejected their arguments that the judge was in error in declining to find the existence of the “transactions retainer”. They contended that, even though they had not pleaded or advanced a case at trial suggesting the existence of a “limited retainer” of the type which these grounds seek to raise, this Court should, notwithstanding, entertain them because it is purely a matter of applying the law to the judge’s findings, and no injustice will accrue to the respondent. To the contrary, counsel for the respondent submitted that the Court should not entertain the grounds. It was his contention that the grounds wholly misconstrue her Honour’s findings. Indeed he submits that the judge could not have made the finding which the appellants allege because no such “limited retainer” had been pleaded or argued before her; and that if it had the respondent would have conducted and argued his case in a different manner. For this, and other, reasons considerable injustice would accrue to the respondent if the Court permitted these grounds to be ventilated on appeal.
As I have previously indicated in [22], I am of the view that the Court should reject these grounds of appeal. The circumstances in which the respondent had signed the solicitor’s certificate, certifying that the directors and shareholders of Twilight had “understood the guarantee and indemnity” and had executed that document in his presence, were advanced before the trial judge only as part of the appellant’s case that the “transactions retainer”, which they alleged, should be implied. It was in this context that her Honour considered those circumstances in the course of her reasons. In referring to the fact that the asset purchase agreement between Esanda and Twilight had been prepared by the solicitors for Esanda, she said:
“It was supported by a guarantee and indemnity executed by Mr. Coughlin and his wife [and their trust company], Mr. Minette and Mr. Simmons. Mr. Story signed a solicitor’s certificate to the effect that he was acting independently of Esanda, that he was satisfied that the guarantors had understood the guarantee and indemnity and that they had executed it in his presence. It is to be presumed that the execution of that certificate was a requirement of Esanda. I do not regard that certificate as evidence indicating that Mr. Story was retained, other than for the preparation of the certificate, by any party to either the asset purchase agreement or the guarantee.” (my emphasis)
Counsel for the appellants has seized upon the concluding words of this passage in her Honour’s reasons and has construed them as a discrete finding by her that Story was retained by Simmons to explain to him the meaning of the guarantee. Building upon that construction he submits that, in the discharge of that limited retainer, Story was in breach of his fiduciary obligation to divulge to Simmons the financial circumstances of his co-guarantors Coughlin and Minette which, so counsel contended, were known to Story but not to Simmons. Indeed, in their written submissions counsel contended that the appropriate order for this Court to make is to enter judgment for the appellants for damages and/or equitable compensation to be assessed. However, as I understood their oral submissions, counsel conceded that the preferable course would be to refer the matter back to the trial judge for further enquiry.
I agree with the submission made on behalf of the respondent that the appellants’ submissions have plainly taken her Honour’s words out of their context. When one reads the words in their context, it becomes clear that her Honour was considering the appellants’ contention, made to her, that the solicitor’s certificate could be used as some evidence from which she could infer that the respondent had been retained by the appellants as their solicitor in negotiating (inter alia) the asset purchase agreement with Esanda. No matter whether one regards her Honour’s choice of words as felicitous or otherwise, it is clear, in my view, that she was saying no more than that she did not regard the solicitor’s certificate as advancing the appellants’ claim in that respect. In my opinion, her reasons were not intended to address a claim which had neither been pleaded nor argued, nor can her remarks be taken as indicating a retainer by Simmons in particular.
Anyway, in my view, the Court should not consider these grounds of appeal. They are grounds which go beyond simply raising points of law or construction which can be determined in the context of the evidence given at the trial. If the claim of “limited retainer” confined to the solicitor’s certificate had been pleaded and advanced at trial, it could not be assumed that the respondent would not have conducted his case differently to meet that claim. Such a claim would have required discrete consideration of the scope of such a limited retainer and what was required of the prudent solicitor in the discharge of it. No doubt such consideration would have, or might have, affected the nature and course of the trial, including the calling of professional evidence touching and concerning the scope of such a retainer. Such a claim, if made, no doubt would have focussed attention upon evidence of what Simmons knew and did not know about the financial circumstances of S&T, Coughlin and Minette; and have required specific findings in respect of such matters. The grounds of appeal assume that Simmons knew nothing of the co-operation agreement and was not aware of the financial circumstances of his co-guarantors. The fact is that there was a deal of evidence suggesting to the contrary. Having regard to the way in which the appellants’ case was made at trial, it was unnecessary for the judge to make findings about these matters.
Appellate courts, including intermediate appellate courts, have shown themselves to be reluctant to entertain, for the first time, “new points” which have not been pleaded or argued in the court of trial. Even in cases where the point sought to be raised involves a “pure point of law or construction”, an appellate court will only entertain it in exceptional circumstances. In Geelong Building Society (in Liquidation) v. Encel[9], Tadgell, J. considered in some detail (at pp.604 ff.) the circumstances which might move an appellate court to entertain for the first time a matter which had neither been pleaded nor argued in the court below. It is sufficient for me to say that the principles to which his Honour referred would not support the entertaining by this Court of the matters now sought to be raised by the appellants. Those principles have been developed on the basis that the orderly disposition of litigation requires a party to plead and raise all causes relevant to his claim before the trial judge and that to permit otherwise (except in exceptional circumstances) tends to subvert the policy of finality of litigation[10]. In Banque Commerciale S.A. en Liquidation v. Akhil Holdings Ltd.[11], Mason, C.J. and Gaudron, J. referred to the general rule that, unless all the facts have been determined beyond controversy or the question is one of construction or law, and it is expedient in the interests of justice to entertain the point, a party may not take a point for the first time on appeal[12]. In respect of the rule, their Honours said:
“Some aspects of that rule appear to derive from public policy considerations directed to ensuring the finality of litigation. On the other hand, some aspects of the rule may have their genesis in estoppel by election in the conduct of litigation, although, if so, the relevant consideration is not that the other party is put in a worse position but that he or she may have been so placed.”
Whatever may be the genesis of the rule, it seems to me to be clear beyond peradventure that it should apply here to preclude the appellants from raising for the first time on this appeal the claim based upon the so-called “limited retainer”. The events and circumstances giving rise to the existence and proof of such a retainer and its breach have not been established beyond controversy. Indeed they are shrouded by dispute. Those events are now some thirteen years old. It would, in my view, be a real injustice to the respondent to allow the matter of the existence and breach of the alleged retainer now to be raised in this Court, particularly in light of the fact that the appellants’ claim, as litigated, was brought at a time when the relevant period of limitation had almost expired and the Master had, in 1998, refused leave to amend the pleadings to allow further claims to be brought by the appellants. I would, for these reasons, not be prepared to entertain or consider the matters raised by grounds 27 and 28 of the notice of appeal. Indeed the Court is being asked to consider the matters “in a vacuum”, as it were, because no application has been made by counsel for leave to amend the pleadings in this regard.
The existence of a duty of care in the absence of the retainer alleged
[9][1996] 1 V.R. 594.
[10]cf. Holcombe v. Coulton (1988) 17 N.S.W.L.R. 71 per McHugh, J.A. at 77-8. The case was returned to the Court of Appeal (NSW) after the decision of the High Court in Coulton v. Holcombe (1986) 162 C.L.R. 1.
[11](1990) 279 at 284.
[12]Suttor v. Gundowda Pty. Ltd. (1950) 81 C.L.R. 418 at 438; University of Wollongong v. Metwally [No. 2] (1985) 59 A.L.J.R. 481 at 483; 60 A.L.R. 68 at 71.
Counsel for the appellants submitted that, if the Court rejected their arguments that the trial judge was in error in not finding the existence of a “transactions retainer”, they should now be permitted to amend their pleadings to allege the existence and breach of a general duty of care owed by the respondent to the appellants. Such application was, it seemed to me, only faintly pressed by counsel and no oral argument was made in support of it. No such claim was made before the trial judge, even though counsel have asserted in their written submissions that the pleadings were broad enough to embrace such a claim. Such assertion cannot be accepted, particularly in the light of the further and better particulars given by the appellants to the respondent on 19 November 1996. As I have already noted in paragraph [22], an application had been made to the Master in September 1998 to amend the pleadings to allege such a general duty of care. That application was dismissed and no appeal was brought from the Master’s order. Notwithstanding, the appellants now ask this Court to grant them leave to amend the pleadings to allege the very claim which was previously refused and to permit them to argue, for the first time, that the existence and breach of such a general duty of care has been established, and that this Court should now decide the point.
I would refuse the leave sought for much the same reasons as I have already given for declining to entertain argument with respect to the existence of the “limited retainer” raised in grounds 27 and 28 of the notice of appeal. The appellants, in my view, have not demonstrated any of the “exceptional circumstances”[13] which need to be shown before such an application would be granted by an appellate court. Indeed it would seem that the appellants, having sought and been refused leave to amend their pleadings to allege such a general duty of care, elected to proceed before the trial judge on the basis of a claim for damages for breach of retainer alone. They cannot now ask this Court to decide that issue. Furthermore, on the findings which the judge made, it can scarcely be contended that the evidence incontrovertibly established the existence, or breach of, a general duty of care. For reasons which I have already given it would be impossible for this Court to determine the extent of any such duty owed by Story to the appellants, or whether such duty was breached, without making for ourselves determinations of fact upon evidence which was not only in dispute but in respect of which credibility was very much in issue. Again, it seems to me that, if such a claim had been made at trial, the evidence and course of the trial may well have taken a
different course, both as to evidence tendered and findings necessary to be made as to existence and breach of such a duty, and loss suffered as a consequence. In circumstances where the appellants have made a conscious decision not to raise the claim which they now seek to raise, there would be palpable prejudice to the respondent for this Court to now grant the leave sought and to permit such a claim to be argued and determined for the first time on appeal.
[13]cf. Geelong Building Society (in liquidation) v. Encel (supra at 605 ff.).
For the reasons given, the appeal should be dismissed.
PHILLIPS, J.A.:
I agree that this appeal should be dismissed and for the reasons given by the President.
BUCHANAN, J.A.:
I agree with Winneke, P. that this appeal should be dismissed for the reasons he has stated.
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