Sims & Ors v Thomson Simmons & Co & Ors No. Scgrg-91-859 Judgment No. S6406

[1997] SASC 6406

SIMS & ORS v THOMSON SIMMONS & CO & ORS

Master's Appeal

Millhouse J

This is an appeal from a Master.  He struck out third party proceedings.  The defendants hope to have them reinstated.

Two chartered accountants, practising in partnership, are trustees of certain family trusts; they themselves are also beneficiaries of the trusts.  The trustees sought the advice of their solicitors over the best way to organise the purchase of land on behalf of the trusts.  They were advised to buy the shares in the company which owned the land.  They did.  They later sold the shares at a profit and were hit with income tax and capital gains tax.  They, in their capacity as trustees, and others, have sued the solicitors on the ground of negligent advice.  The solicitors are defending the action and in their defence have pleaded contribution: they allege the accountants are tax experts who should have known the law as well as they, their solicitors: before the defendants gave their advice they had discussed the matter with one of the trustees.  The defendants also joined the two accountants in their personal capacities, as third parties, claiming relief, effectively, on the same grounds as they have claimed contribution in the defence.

The Master gave his Reasons for striking out the third party proceedings:-

"I have - spent considerable time evaluating the pleadings in general and, in particular, paragraph 47 of the defence and the statement of claim in the third party proceedings.  It is my view that the claims against Sims and Richmond, if not identical in wording, are, in fact, identical in effect.  I consider, therefore, that the claim in the third party proceedings is a duplication of the claim for contributory negligence in paragraph 47 of the defence.  The third party claim is therefore, in my opinion, vexatious and should not be allowed to remain."

Mr Hugh Abbott for the appellants/defendants argued that it was just too soon to know how the facts would come out at trial. Until they do the third party proceedings should stay on foot, in case. He referred to the Full Court decision in Austrust Ltd v Astley ((1996) 67 SASR 207).

The answer to Mr Abbott's argument, I suggest, is that one must assume, for the purposes of considering an application to strike out, the allegations in the pleadings to be proved.  The pleadings assert only one result: they do not contemplate, as Mr Abbott needed to argue, a variety of results.

I asked Mr Paul Slattery, for the respondents, why he opposed leaving the third party proceedings be, pending the outcome of the hearing. He said it would mean double representation, extra costs and it was against public policy. He pointed to the virtual identity of the relief claimed by way of contribution from the plaintiffs in the Defence and the relief claimed against them in the third party proceedings. He relied on the decision of the NSW Court of Appeal in Daniels v Anderson & Others ((1995) 37 NSW LR 438 especially @ pp578-580.) In that case a firm of chartered accountants (Deloitte Haskins & Sells) were sued for negligence by a client (AWA). The defendants wanted to join the previous managing director of the plaintiff (Hooke) alleging his contributory negligence: they had already pleaded it in their defence. Clarke JA and Sheller JA said that there is no ideal solution to the situation. They referred to the view of Dr Glenville Williams in his "Joint Torts and Contributory Negligence" and to the Western Australian case of Doyle v Pick & Rickwood ((1965) WAR 95). Jackson J (@ 96):-

"..........  As the damages awarded against the defendant correspond exclusively to his own share of the responsibility and the negligence of the third party has already been taken into account in arriving at those damages, it would not be just and equitable that the defendant should have any recovery against the third party.  If it were otherwise, then the third party would have to pay twice, because he is liable at the suit of the plaintiff for his share of the responsibility for the damage.  This opinion, which I advanced during argument at the hearing, has, I am glad to find, the support of Professor Glanville Williams in his book on Joint Torts and Contributory Negligence at 446."

Clarke JA and Sheller JA go on:-

".... We consider that the answer proffered by Dr Williams and Jackson J offers the only practical solution although we acknowledge that its effect is to enable a party against whom it is found that he would, if sued, have been liable to AWA to leave the arena virtually unscathed.

We are also aware that it is possible to conjure up complex fact situations in which Dr Williams' solution may not provide the answer.  For instance if AWA had sued Deloitte Haskins & Sells and Hooke, and each had cross-claimed against the other, there would be obvious difficulties which may not be capable of resolution by recourse to the approach advocated by Dr Williams.

We are not, however, concerned with hypothetical situations but in endeavouring to provide the most satisfactory solution to the present problem.  Where, as in the present circumstances, a party has secured partial relief, by way of a finding of contributory negligence it would not, in our opinion, be just and equitable that it obtain an award for any compensation.  If it were otherwise it would unjustly receive double compensation."

It seems to me that the situation here is similar to that in Daniels v Anderson. The defendants should not be able to succeed twice - once for contribution against the plaintiffs and again against them as third parties.

To strike out the third party proceedings may not be ideal but it is the practical solution.  I think the Master made the correct decision.

The appeal is dismissed.