Tasmanian Sandstone Quarries Pty Ltd v Legalcom Pty Ltd
[2010] SASCFC 6
•19 July 2010
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
TASMANIAN SANDSTONE QUARRIES PTY LTD v LEGALCOM PTY LTD
[2010] SASCFC 6
Judgment of The Full Court
(The Honourable Justice Nyland, The Honourable Justice Gray and The Honourable Justice Kourakis)
19 July 2010
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - NEGLIGENCE
PROFESSIONS AND TRADES - LAWYERS - DUTIES AND LIABILITIES - SOLICITOR AND CLIENT - RETAINER - EXISTENCE OF RETAINER
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - IN GENERAL - GENERAL PRINCIPLES - FUNCTIONS OF APPELLATE COURT - GENERALLY
Appeal from decision of Judge dismissing claim for damages for alleged breach of duty by a solicitor - client claimed that breach arose as a consequence of a failure by the solicitor to advise about or arrange for a pre-settlement inspection of business assets which the client had contracted to purchase - whether Judge erred in approach to duty and scope of duty - whether Judge erred in concluding that there had been no breach of duty of care in contract or in tort - alternative contention asserted by solicitor - whether there was a contract of retainer established between the parties - whether Judge erred in assessment of loss and damage - discussion of role of the appellate court.
Held: appeal dismissed - the approach of the Judge involved an appropriate articulation of duty and scope of duty - evidence supported finding that retainer of limited nature - evidence indicated that solicitor did not act unreasonably in failing to advise about or arrange for a pre-settlement inspection and was not in breach of duty - Judge’s findings of fact open on the evidence - evidence justified a conclusion that a duty of care was owed both in contract and in tort and that the extent and reach of the duty was the same - Judge’s approach to assessment of loss and damage not in error.
Supreme Court Act 1935 (SA) s 50; Supreme Court Civil Rules 2006 (SA) r 292, referred to.
Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111; Fox v Everingham (1983) 76 FLR 170; MacIndoe v Parbery (1994) Aust Torts Reports 81-290; Fox v Percy (2003) 214 CLR 118; Warren v Coombes (1979) 142 CLR 531; Jones v Hyde (1989) 63 ALJR 349; Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472; Wade v Australian Railway Historical Society (2000) 77 SASR 221; Norbis v Norbis (1985) 161 CLR 513; Coal & Allied Operations v Australian Industrial Relations Commission (2000) 203 CLR 194; Coulton v Holcombe (1986) 162 CLR 1; University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; Jones v Bartlett (2000) 205 CLR 166; Vairy v Wyong Shire Council (2005) 223 CLR 422; Neindorf v Junkovic (2005) 80 ALJR 341; Breen v Williams (1996) 186 CLR 71; Astley v Austrust Ltd (1999) 197 CLR 1; McManus Developments Ltd v Barbridge Properties Ltd [1996] PNLR 431; Hawkins v Clayton (1988) 164 CLR 539; Jennings v Zilahi-Kiss (1972) 2 SASR 493; Heydon v NRMA Ltd (2000) 51 NSWLR 1; Edward Wong Finance Co Ltd v Johnson Stokes & Master (A Firm) [1984] AC 296; MacPherson v Kevin J Prunty & Associates [1983] 1 VR 573; Bryan v Maloney (1995) 182 CLR 609, considered.
TASMANIAN SANDSTONE QUARRIES PTY LTD v LEGALCOM PTY LTD
[2010] SASCFC 6Full Court Nyland, Gray and Kourakis JJ
NYLAND J: I agree that the appeal should be dismissed for the reasons expressed by Gray J.
GRAY J.
This appeal is from the dismissal by a Judge of this Court of a claim for damages as a consequence of an alleged breach of duty by a solicitor.
The primary question arising on the appeal is whether the existence of particular risk factors arising in a commercial transaction should lead to the conclusion that the solicitor with a limited retainer was in breach of duty by not advising the client to inspect plant and equipment the subject of the purchase prior to settlement.
I have reached the conclusion that this appeal should be dismissed. In my view, the Judge’s conclusion that the solicitor did not act in breach of duty should be sustained. In these circumstances, it is necessary to deal only briefly with the notice of alternative contentions advanced by the respondent and the claim for contribution made. For the same reason, it is proposed to address briefly the appellant’s complaints with respect to the assessment of damages.
I propose to first set out a brief review of the facts before summarising the Judge’s findings and conclusions. It is only against this background that the issues on appeal can be discussed, analysed and addressed. Further factual details will be provided when assessing the issues on appeal.
Background Facts
During the mid to late 1990’s Tasmanian Sandstone Pty Ltd operated a sandstone quarry in southeast Tasmania. By the year 2000, Tasmanian Sandstone faced insolvency. Its directors, Peter and Marie Wood, appointed Mark Christopher Hall and Andrew James Heard as administrators.
Rito Calabrese, a stonemason with experience in the cutting, sawing and dressing of stone, had an extensive involvement in the operation of slate and sandstone quarries. Mr Calabrese was familiar with the saws and other equipment used in quarrying and stonecutting. He had considerable business experience, including the operation of quarries at Wistow and Willunga in South Australia. From 1997 until 2002 he was associated with a business engaged in the cutting and supply of slate, bluestone and sandstone, to the building industry in South Australia. Mr Calabrese was keen to acquire the assets of Tasmanian Sandstone, including the quarry and the plant and machinery used in and about the quarry.
Mr Calabrese retained Legalcom Pty Ltd, an incorporated legal practice. At the time, Legalcom Pty Ltd traded as Goldberg & Co. Mr Calabrese’s legal affairs were handled by an experienced commercial solicitor with the firm, John Goldberg. Mr Calabrese had retained Legalcom on several other matters before 2000. Mr Goldberg was known to him.
Mr Calabrese acquired on the suggestion of Mr Goldberg, a newly incorporated company, Tasmanian Sandstone Quarries Pty Ltd, to be the purchaser of the quarry assets. Following extensive negotiations Tasmanian Sandstone Quarries entered into an agreement with Tasmanian Sandstone, Mr and Mrs Wood and the administrators, for the purchase of the quarry assets. Mr and Mrs Wood were the owners of part of the land comprising the quarry. This land formed part of the sale. The agreement required Tasmanian Sandstone Quarries to assume liability for and to arrange the discharge of, several secured debts. In addition, a cash payment of $200,000.00 was to be made. Settlement took place on 19 June 2000.
Following settlement, Tasmanian Sandstone Quarries asserted that plant and equipment, undamaged at the time of entry into the agreement, had been damaged prior to settlement. It was said that one item in particular, a bridgesaw, had sustained significant damage. Although the bridgesaw could still operate, its efficiency was substantially reduced.
In 2004, Tasmanian Sandstone Quarries instituted the within proceedings claiming damages against Tasmanian Sandstone, the administrators and Legalcom. It appears that at the time of sale Tasmanian Sandstone was insolvent and remained so thereafter. Default judgment was entered against Tasmanian Sandstone. However at trial, the claim of damages against Tasmanian Sandstone was abandoned. Tasmanian Sandstone Quarries settled its claim against the administrators and a consent judgment was entered in its favour in the amount of $225,000.00.
The action proceeded to trial against Legalcom. Tasmanian Sandstone Quarries contended that Legalcom owed a duty of care to ensure that Tasmanian Sandstone Quarries received undamaged goods on settlement. It also contended that the duty of care included a duty to advise Tasmanian Sandstone Quarries to carry out an inspection immediately prior to settlement or to arrange such an inspection. It was Tasmanian Sandstone Quarries’ case that there existed a number of specific risk factors that in the circumstances of the retainer and the particular transaction, gave rise to these duties. It was said that Legalcom had breached its duty of care. Initially, the claim against Legalcom alleged a duty of care arising in contract alone. At trial, the claim was broadened to allege breach of a tortious duty of care.
The Conclusions of the Trial Judge
The Judge dismissed the claim of Tasmanian Sandstone Quarries.[1]
[1] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 (White J).
The Judge found that there was a contract of retainer between Tasmanian Sandstone Quarries and Legalcom, but ultimately held that any obligations arising under that contract had not been breached.
At trial there was a dispute between the parties as to the terms and extent of the retainer. Mr Calabrese claimed that Legalcom acted in relation to the entire transaction in circumstances where Tasmanian Sandstone Quarries and Mr Calabrese were entirely reliant on Mr Goldberg. Legalcom’s case was that the retainer was limited to advising on discrete aspects of the acquisition process. The Judge rejected the evidence of Mr Calabrese where it differed from that of Mr Goldberg and accepted Mr Goldberg’s evidence as to the terms and extent of his retainer. However, the Judge did not make an express finding as to the limits of the retainer.
The Judge accepted Mr Goldberg’s evidence that when first retained he was asked to look into the possible acquisition of Tasmanian Sandstone, but that the scope of his retainer changed as the circumstances unfolded, and ultimately he was asked only to assist Mr Calabrese to achieve his goal of acquiring the quarry. Mr Goldberg specifically denied the suggestion that he was retained to “assist in any way he could; that is, act as a professional adviser generally”. The Judge accepted this evidence,[2] finding that Legalcom through Mr Goldberg was not retained as an adviser generally in respect of all aspects of the transaction.
[2] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [60].
Unsurprisingly, the Judge did not make any express finding of any overall or general retainer – there was no such retainer. The Judge concluded that Mr Goldberg had a limited retainer. He was only instructed to advise on discrete aspects of the proposed acquisition. Many negotiations were conducted by Mr Calabrese directly with other parties, on most occasions in the absence of Mr Goldberg. Mr Goldberg was not involved in key aspects of transactions, with Mr Calabrese managing those aspects directly on his own behalf.
The Judge in his reasons rejected attempts by Mr Calabrese to enlarge the role and involvement of Legalcom in the transaction and in this respect observed:[3]
The subject matter of this litigation is obviously important to Mr Calabrese, and on several occasions during the course of his evidence his emotions overtook him. He gave his evidence without the benefit of notes. Although I was impressed by much of his evidence, I also considered that he had a good appreciation of where his interests lay and that, from time to time, he tailored his evidence so as to advance those interests better. That tailoring may on occasions have been the result of a process of unconscious rationalisation. I also considered that some of his evidence was reconstruction, ie, the way in which he now construes relevant events in the past, and that it was not a reliable recollection of those events.
It was very obvious that Mr Calabrese sought to enlarge Mr Goldberg’s role and participation in the transaction and to emphasise his own dependence on him while, at the same time, diminishing his own responsibility. Examples will be seen in my later findings.
…
Mr Calabrese claimed that Mr Goldberg attended two or three of the creditors’ meetings with him. Despite that evidence, I am satisfied that Mr Goldberg attended only one meeting, namely, the meeting held on 11 April 2000. Mr Calabrese’s evidence about Mr Goldberg’s attendances was contradicted by Mr Goldberg, whose evidence I accept. Mr Goldberg’s evidence was confirmed by the record of attendees contained in the minutes of the creditors’ meetings prepared by the administrators and also by Legalcom’s contemporaneous costs entries. I considered that this was one example of Mr Calabrese seeking to enlarge Mr Goldberg’s involvement in the transaction.
…
Mr Calabrese made an offer to the administrators for the purchase of the assets of TSPL on or before 23 February 2000. This offer was made by Mr Calabrese directly to the administrators and not through Mr Goldberg. In fact, Mr Goldberg was absent from Adelaide for most of the last week of February 2000. While he was away, Mr Calabrese reported to Ms Collum, a solicitor at Legalcom, that he had put a new offer to the administrators in conjunction with Mr Wood and that he (Mr Calabrese) was obtaining further information from his accountant which the administrators had requested. This was one of several occasions when Mr Calabrese communicated with the administrators on important matters concerning the transaction without the involvement of Mr Goldberg. These occasions too undermine his claims of complete reliance on Mr Goldberg.
…
Mr Goldberg was not involved in the drafting of this agreement. Nor was he asked to comment on its terms before Mr Calabrese signed it. It is another example of Mr Calabrese’s willingness to act independently of Mr Goldberg in relation to the transaction.
[3] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [37]-[38], [57], [62], [88].
These and other similar observations, informed the Judge’s finding with respect to the limited nature of the retainer between Tasmanian Sandstone Quarries and Legalcom. As extracted above, the Judge rejected Mr Calabrese’s evidence and in particular his attempt to suggest that he was unusually dependant and reliant on Mr Goldberg. The Judge reached the conclusion that Mr Calabrese falsely attempted to enlarge Mr Goldberg’s role, to emphasise his own dependence and to diminish his own responsibility. As earlier observed, the Judge found that Mr Calabrese acted independently of Mr Goldberg and Legalcom in a number of important respects, and the contract of retainer was limited.
It is to be recorded that at trial, central to the case of Tasmanian Sandstone Quarries was an allegation that Mr Goldberg of Legalcom was on notice of a specific threat of sabotage to the quarry assets. It was said that Mr Calabrese had informed Mr Goldberg of this threat. The report of a threat was said to be an additional matter bearing upon the standard of care required of Legalcom. The Judge rejected Mr Calabrese’s evidence in this respect, observing:[4]
I do not accept Mr Calabrese’s evidence concerning his alleged report to Mr Goldberg of what Mr Williams was said to have told him [about the threat of sabotage].
My decision in that respect results in part from my assessment of Mr Goldberg’s evidence as honest and generally reliable, and from my misgivings about the reliability of some of Mr Calabrese’s evidence.
The Judge then set out his detailed reasons for his rejection of Mr Calabrese’s evidence.[5] These findings were not challenged on appeal.
[4] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [231]-[232].
[5] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [233]-[245]
Without making an express finding that any duty of care was owed in tort,[6] the Judge concluded that whether a duty arose in contract or in tort, it was in substance the same duty.
[6] The trial Judge appears to have accepted that a tortious duty arose.
Specific Risk Factors
As earlier observed, Tasmanian Sandstone Quarries’ contended at trial that there existed a number of specific risk factors associated with the transaction that gave rise to the alleged duties of care. Those risk factors included alleged hostilities and the threat of sabotage associated with the transaction. The nature of those factors will be discussed later in these reasons.
The Judge in his detailed reasons rejected the suggestion that Legalcom breached any duty of care. The Judge set out the well-established general principles and drew attention to the following observations of the Full Federal Court in Fox v Everingham:[7]
The retainer given by the Foxes to the respondents obliged the respondents to act generally in the Foxes’ interests in and about their entering into the contract and their taking of title to the property pursuant thereto. At the least that obligation required the respondents, either themselves or by an employee qualified to do so, to go through the contract with the Foxes and explain the salient points of it to them. In this way their principal rights and obligations under it would be explained as would the general course the matter might be expected to take. The respondents were also under an obligation to explain to the Foxes provisions of the contract which were in an unusual form and which might affect their interests as they were known by the respondents to be.
The respondents were also under an obligation which required them to give attention, before the contract was signed by the Foxes, to the question of whether it, from their point of view, contained adequate provisions to protect them against a variety of contingencies which might reasonably have been foreseen as likely to arise if things did not go as expected. The Foxes were entitled to rely on the respondents to see to it that the contract was adequate to protect their interests.
In cases such as the present a solicitor is paid not only for what he in fact does, but also for the responsibility he assumes in trying to protect clients from financial loss if things go wrong. It is easy enough to act for people if things go as they are expected to. But it is because the unexpected will sometimes happen that solicitors are rightly paid the fees which they command. The corollary of this proposition is that if they do not measure up to the standard which is required of them, they are liable for breach of the obligation which they owe to clients.
[References omitted]
[7] Fox v Everingham (1983) 76 FLR 170 at 174–175.
The Judge also referred to the remarks of Kirby P in MacIndoe v Parbery:[8]
…I would reject the argument for the solicitor that his obligation extended no further than to prepare the documents for the sale of the business and to explain to the clients the legal effect of the various clauses of the documents. In modern circumstances, a solicitor’s duty of care to a client such as the appellant is not so confined…
However, this extension of the solicitor’s duty of care to the client – beyond the strict confines of the contract of retainer narrowly construed – still has its boundaries. The solicitor is not (at least ordinarily), by reason of a retainer, converted into a general investment adviser for the client. Nor is the solicitor deemed by the law to be imbued with perfect foresight. He or she is not required to foresee every conceivable business risk and to alert the client against them. Certainly, the solicitor’s duty goes beyond the obligation to explain the usual perils. It will embrace, as well, the duty to explain unusual risks which are reasonably foreseeable and which the client should weigh.
[8] MacIndoe v Parbery (1994) Aust Torts Reports 81-290 at 61,534.
The Judge then summarised the submissions of Tasmanian Sandstone Quarries as follows:[9]
In its final submissions, [Tasmanian Sandstone Quarries] expanded the purpose of the inspection which it said should have been advised. It contended that Mr Goldberg should have advised a pre-settlement inspection so as to ensure that [Tasmanian Sandstone Quarries] would not only receive at settlement the plant and equipment which it had contracted to purchase but also to ensure that that plant and equipment was in the same condition as it had been when Mr Calabrese worked at the quarry in late April. [Tasmanian Sandstone Quarries] accepted that an inspection of that kind would have required the starting up of the machinery and the operating of the equipment.
[9] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [246].
The Judge then addressed the factors that he considered militated against a finding that Legalcom’s duty of care required advice to be given that there be a pre-settlement inspection. The Judge drew attention to the fact that Mr Calabrese’s knowledge of the transaction was materially greater than that of Mr Goldberg and that in particular, Mr Calabrese was in a better position to assess the significance of risk factors associated with the transaction. Mr Wood was better known to Mr Calabrese and they had been in regular contact during periods leading to the agreement. Relevantly, Mr Calabrese gave evidence that he did not trust Mr Wood and had not done so for some months prior to the agreement. The Judge considered that Mr Calabrese was in a better position than Mr Goldberg, to assess Mr Wood and Mr Wood’s attitude. The Judge pointed out that Mr Calabrese was also in direct communication with the administrators. The Judge concluded that Mr Calabrese had a detailed knowledge of the quarry and had undertaken a complete inspection of the quarry. Mr Goldberg had not been to the quarry and was unfamiliar with it. The Judge also concluded that Mr Calabrese was the person in the best position to make an assessment with respect to the security of the plant and equipment and it was he who understood the significance and importance of particular items of plant and equipment to the operation of the quarry.
These matters led the Judge to the following finding:[10]
An assessment of the risks to the security of the plant and equipment which were inherent in the transaction, and those arising from Mr Wood’s hostility towards Mr Calabrese, did not require the application of any particular professional skill or evaluation. The assessment was one which Mr Calabrese was himself quite capable of making. [Tasmanian Sandstone Quarries] did not point to any circumstance suggesting that Mr Calabrese was dependent or reliant upon Mr Goldberg to provide advice about a pre-settlement inspection.
[10] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [251].
The Judge’s ultimate conclusion was expressed as follows:[11]
Finally, it is to be remembered that Legalcom was retained as a professional legal adviser. It was not retained as an adviser generally in respect of all aspects of the transaction. The boundaries between legal advice, on the one hand, and commercial advice, on the other, are not clear and often the two are intrinsically interlinked. But in this case, the advice which it is said should have been given seems to be of a commercial or strategic kind. Perhaps this is best illustrated by my earlier findings that the matters upon which [Tasmanian Sandstone Quarries] relied were matters as well, if not better, known to Mr Calabrese than to Mr Goldberg and, further, not matters requiring the application of any particular knowledge or skill.
Ultimately, the touchstone is one of reasonableness. When regard is had to these matters, I do not consider that it can be concluded that Legalcom acted unreasonably in omitting to advise [Tasmanian Sandstone Quarries] to carry out a pre-settlement inspection.
[Emphasis in original]
[11] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [257]-[258].
The Judge proceeded to assess the damages that he would have awarded had the claim of Tasmanian Sandstone Quarries been established. The Judge did so to allow for the contingency that his dismissal of the claim might be reversed on appeal. A claim made by Legalcom for contribution in the event that there was found to be a breach of duty was also addressed.
The Appeal
On appeal, Tasmanian Sandstone Quarries complained that the Judge erred in his conclusion that there had been no breach of duty of care in contract or in tort. In particular, it was said that the breach arose as a consequence of Legalcom’s failure to advise Tasmanian Sandstone Quarries to carry out a pre-settlement inspection of the assets, in the failure to arrange such an inspection itself and finally, by failing to ensure that Tasmanian Sandstone Quarries on settlement received that which it had contracted to purchase. It was further complained that the Judge erred in his assessment of loss and damage.
As discussed earlier, a notice of alternative contention was advanced by Legalcom. It was asserted that there was no contract of retainer established between Tasmanian Sandstone Quarries and Legalcom. Further, it was argued that the order permitting Tasmanian Sandstone Quarries to amend its claim to plead a cause of action in tort, should have been ordered to take effect from the date of the application and that accordingly, the pleaded cause of action in tort would be statute barred.
The Role of the Appeal Court
This appeal is by way of rehearing.[12] An appeal by rehearing does not involve a completely fresh hearing by the appellate court of all the evidence. Rather, the court proceeds on the basis of the record and any fresh evidence that it chooses to admit.[13] The function of the appellate court in these circumstances has been outlined in some detail in a number of authorities.[14] When rehearing a case, the appellate court must be aware of the advantages that the trial judge had in seeing the witnesses and in forming impressions as to credibility on this basis. The appellate court does not have such an advantage. The limitations of the appellate court were highlighted by the High Court in Fox v Percy.[15] Gleeson CJ, Gummow and Kirby JJ in their joint judgment observed:[16]
…[the appellate court] must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses’ credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.
[Footnotes omitted]
[12] The appeal is pursuant to section 50 of the Supreme Court Act 1935 (SA) and rule 292 of the Supreme Court Civil Rules 2006 (SA).
[13] Fox v Percy (2003) 214 CLR 118 at [22].
[14] See eg Warren v Coombes (1979) 142 CLR 531; Jones v Hyde (1989) 63 ALJR 349 at 351-352; Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472.
[15] Fox v Percy (2003) 214 CLR 118.
[16] Fox v Percy (2003) 214 CLR 118 at [23].
However, their Honours observed that despite these limitations, the appellate court may still draw their own inferences and conclusions:[17]
Nevertheless, mistakes, including serious mistakes, can occur at trial in the comprehension, recollection and evaluation of evidence. In part, it was to prevent and cure the miscarriages of justice that can arise from such mistakes that, in the nineteenth century, the general facility of appeal was introduced in England, and later in its colonies. Some time after this development came the gradual reduction in the number, and even the elimination, of civil trials by jury and the increase in trials by judge alone at the end of which the judge, who is subject to appeal, is obliged to give reasons for the decision. Such reasons are, at once, necessitated by the right of appeal and enhance its utility. Care must be exercised in applying to appellate review of the reasoned decisions of judges, sitting without juries, all of the judicial remarks made concerning the proper approach of appellate courts to appeals against judgments giving effect to jury verdicts. A jury gives no reasons and this necessitates assumptions that are not appropriate to, and need modification for, appellate review of a judge's detailed reasons.
Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of "weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect".
[Footnotes omitted]
[17] Fox v Percy (2003) 214 CLR 118 at [24]-[25].
As discussed by the High Court in Wade v Australian Railway Historical Society[18] it is not appropriate to invite an appellate court simply to revisit the relevant evidence, including expert evidence, and then contend that the court should reach a different conclusion. In an appeal by way of rehearing, error must be demonstrated for the appellate court to be entitled to disturb the decision of the primary decision-maker.[19] It is not for the court to merely substitute its own view, as if it were again performing the function of the trial judge. Rather, it is the court’s duty to consider whether the findings were incorrect.[20] Furthermore, the manner in which the case is conducted by the parties on appeal ought not depart from the manner in which the case was conducted at trial, and generally, the appeal arena is not the appropriate forum to raise new arguments.[21]
[18] Wade v Australian Railway Historical Society (2000) 77 SASR 221 at [38] (Doyle CJ, Duggan & Lander JJ agreeing).
[19] Norbis v Norbis (1985) 161 CLR 513 at 518-519 (Mason & Deane JJ); see also Coal & Allied Operations v Australian Industrial Relations Commission (2000) 203 CLR 194 at 203-204 (Gleeson CJ, Gaudron & Hayne JJ).
[20] See eg the observations of Gibbs CJ, Wilson, Brennan & Dawson JJ in Coulton v Holcombe (1986) 162 CLR 1 at 7; see also Wade v Australian Railway Historical Society (2000) 77 SASR 221 at [38] (Doyle CJ, Duggan & Lander JJ agreeing
[21] University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481 at 483 (The Court).
…elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.
These statements of principle govern the approach to be followed by this Court.
A Limited Retainer
Mr Goldberg was first instructed in relation to the possible quarry acquisition on 7 February 2000. At that time, those instructions were to speak to the administrator and Mr Wood with a view to the possible acquisition of a sandstone quarry in Tasmania, for Mr Calabrese.
Thereafter, Mr Goldberg’s instructions related to discrete tasks associated with the proposed acquisition. He gave advice to Mr Calabrese about the use of an incorporated entity as the proposed purchaser and he gave tax advice about the way in which the acquisition might be structured. He acted as a coordinator in regard to specific aspects of the proposed acquisition. However, in respect to many important aspects of the proposed acquisition, Mr Calabrese acted directly without Mr Goldberg’s involvement and often without his prior knowledge.
From time to time, Mr Calabrese negotiated directly and in the absence of Mr Goldberg with the administrators and with Mr Wood. One example is Mr Calabrese’s entry into a side agreement with Mr Wood to enable Mr Calabrese to enter into possession prior to settlement and operate the quarry using existing plant and equipment. Mr Goldberg was not consulted about this arrangement and he provided no advice with respect to this “side transaction”. Mr Calabrese operated the quarry for a significant period prior to settlement. A dispute arose between Mr Calabrese and Mr Wood as a result of this arrangement. Mr Calabrese was concerned that Mr Wood was removing quarried stone inappropriately. Mr Calabrese was aware that security was present at the quarry site. Mr Goldberg came to be informed of these matters.
Mr Calabrese discussed his financial needs with Mr Goldberg. However, it was Mr Calabrese who then proceeded to make his arrangements for finance.
In summary, a review of the evidence discloses that this was a quarry acquisition transaction controlled by Mr Calabrese. Mr Calabrese negotiated directly with the other parties to the transaction. He negotiated a side agreement which allowed early possession. He dealt with third party and government interests directly. He dealt with his own financiers directly. He dealt with other possible acquirers in an attempt to arrange side deals. Mr Calabrese could be fairly described as “street wise”. Mr Calabrese sought advice from Mr Goldberg from time to time on discrete aspects of the quarry acquisition including: the identity of the purchasing entity; tax; particular aspects of due diligence; and, discrete aspects of problems arising from the agreement in regard to pre-settlement possession of the quarry and plant and equipment. Mr Calabrese also instructed Mr Goldberg to speak with the other parties from time to time. However, Mr Goldberg was not instructed as a solicitor to act and advise in regard to all aspects of the transaction.
My review confirms that the findings of the Judge with respect to the limited nature of the retainer were open on the evidence.
Nature and Scope of Duty
On appeal, Tasmanian Sandstone Quarries contended that the Judge erred in finding that there was no breach of the duty to exercise reasonable care by not advising Tasmanian Sandstone Quarries to carry out an inspection immediately prior to settlement.
The Judge characterised the relevant question as being: did Legalcom act unreasonably in failing to advise Tasmanian Sandstone Quarries to carry out a pre-settlement inspection, or alternatively, to carry out its own inspection? In particular, the Judge observed:[22]
The authorities indicate that it is inappropriate to frame issues concerning the standard of care required in terms of duty. I referred to some of the authorities on this topic in Haseldine v State of South Australia. Given that Legalcom owed both contractual and common law duties of care to [Tasmanian Sandstone Quarries], the preferable approach is to consider whether it acted unreasonably in failing to advise [Tasmanian Sandstone Quarries] to carry out a pre-settlement inspection or, alternatively, to carry out its own inspection. Because this is a question of reasonableness, it raises a question of fact.
In its articulation of the duty and standard of care required of Legalcom, [Tasmanian Sandstone Quarries] did not distinguish between the duty arising by contract, and the common law duty of care of a solicitor. [Tasmanian Sandstone Quarries’] case was that on either basis, Legalcom should have advised it to arrange an inspection of the plant and equipment prior to settlement so as to ensure that it would receive at settlement the plant and equipment which it had contracted to purchase or, alternatively, itself to have arranged an inspection of the plant and equipment for that purpose. Legalcom denied that it owed either duty.
[Tasmanian Sandstone Quarries] did not contend that the retainer contained an express term concerning pre-settlement inspection. Nor, as I understood its submission, did it contend that the standard of care for which it contended applied in all cases of the present general kind. Its case was that the “risk factors” inherent in the transaction, together with Legalcom’s knowledge of the hostility of Mr Wood to Mr Calabrese, meant that the implied contractual duty and the common law duty of care required it either to advise [Tasmanian Sandstone Quarries] to carry out a pre-settlement inspection or itself to carry out such an inspection. It will be necessary to identify the matters upon which [Tasmanian Sandstone Quarries] relied shortly. Before doing so however, it is appropriate to address some issues of general principle.
[Footnote omitted]
The Judge concluded that Legalcom did not breach any duty of care, whether arising in contract or in tort.
[22] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [206]-[208].
On appeal, Tasmanian Sandstone Quarries submitted that the Judge blurred the distinction between duty and scope of duty and that as a consequence entered into his consideration of fact on an incorrect premise.
The Judge was required to reach a conclusion as to whether a duty of care was owed and if so, whether that duty was breached in the manner alleged. The approach undertaken by the Judge was unremarkable. As Gleeson CJ pointed out in Jones v Bartlett:[23]
There is no ground in principle for imposing upon the respondents an obligation greater than an obligation to take reasonable care to avoid foreseeable risk of injury to their prospective tenants and members of their household. The critical question is as to what is reasonable. The judgment of the Full Court, with which I agree, to the effect that there was no failure to take reasonable care, was a judgment of fact. It cannot be circumvented by an attempt to formulate the legal duty with greater particularity, in a manner which seeks to pre-empt the decision as to reasonableness.
[23] Jones v Bartlett (2000) 205 CLR 166 at [57].
In Vairy v Wyong Shire Council, McHugh J observed to a similar effect:[24]
As a result, the duty owed by motorists to other users of the highway, for example, is expressed in terms of the duty to take reasonable care for the safety of other users of the highway having regard to all the circumstances of the case. The duty is not subdivided into categories such as a duty to keep a proper lookout or sound a warning or to keep a safe distance away from the car in front. In the particular circumstances of the case, failure to do one or more of these things may constitute a breach of the duty to take reasonable care. But they are not themselves legal duties for the purpose of the law of negligence. If they were, a trial judge would be bound to direct a jury in the circumstances of a particular case that the defendant had a duty to keep a proper lookout or sound his or her horn, as the case may be. Given such a direction, the only question for the jury would be whether or not a motorist had complied with the duty specified by the judge. But it is the jury, not the judge, that determines whether reasonable care required the motorist to keep a proper lookout or to sound the horn.
…
As I have already indicated, at times during the present appeal and the appeal of Mulligan v Coffs Harbour City Council heard at the same time, the argument for various parties did not keep the issues of duty and breach distinct. The arguments were often clouded by reference to phrases such as "the scope and content of duty" and "duty to warn". Judges and lawyers often use such phrases. When they are understood as commensurate with the standard of care required to discharge the defendant's duty of reasonable care, they cause no harm. But often enough they are used as if they themselves define or were the duty, or part of it. Using them creates the risk that they will be treated as stating legal propositions and convert what is a question of fact into a question of law. Hence, their use invites error in analysis, particularly the analysis of judicial precedents.
[Footnote omitted]
[24] Vairy v Wyong Shire Council (2005) 223 CLR 422 at [26], [29].
Counsel also referred to the observations of Kirby J in Neindorf v Junkovic where approval was given to the following academic commentary of Professor Fleming:[25]
Professor Fleming advanced two reasons why defining the scope of the duty of care in an overly specific fashion should be avoided:
The general standard of conduct required by law is a necessary complement of the legal concept of "duty". There is not only the question "Did the defendant owe a duty to be careful?" but also "What precisely was required of him to discharge it?" Indeed, it is not uncommon to encounter formulations of the standard of care in terms of "duty", as when it is asserted that a motorist is under a duty to keep a proper lookout or give a turn signal. But this method of expression is best avoided. In the first place, the duty issue is already sufficiently complex without fragmenting it further to cover an endless series of details of conduct. "Duty" is more appropriately reserved for the problem of whether the relation between the parties (like manufacturer and consumer or occupier and trespasser) warrants the imposition upon one of an obligation of care for the benefit of the other, and it is more convenient to deal with individual conduct in terms of the legal standard of what is required to meet that obligation. Second, it is apt to obscure the division of functions between judge and jury. It is for the court to determine the existence of a duty relationship and to lay down in general terms the standard of care by which to measure the defendant's conduct; it is for the jury to translate the general into a particular standard suitable for the case in hand and to decide whether that standard has been attained.
[Footnote omitted]
[25] Neindorf v Junkovic (2005) 80 ALJR 341 at [52].
It is to be observed that any implied contractual duty is one of reasonable or due skill and care. As described by Dawson and Toohey JJ in Breen v Williams:[26]
… it is common ground that the obligation of the respondent under the contract between him and the appellant was to use reasonable skill and care in treating and advising the appellant. It is unnecessary to pause to examine whether that standard of care was imposed upon the respondent by inference, by implication or as a legal incident of that kind of contract. Nor is it necessary to consider the effect of the overlap of the duty imposed in contract and in tort in this area. …
[Footnote omitted]
[26] Breen v Williams (1996) 186 CLR 71 at 91.
Similarly, Brennan J observed:[27]
In the absence of special contract between a doctor and a patient, the doctor undertakes by the contract between them to advise and treat the patient with reasonable skill and care. …
[27] Breen v Williams (1996) 186 CLR 71 at 78. See also Astley v Austrust Ltd (1999) 197 CLR 1 at 23.
The approach of the Judge involved an appropriate and adequate articulation of duty and scope of duty.
Breach of Duty
As earlier observed, Tasmanian Sandstone Quarries submitted that there were specific risk factors associated with the transaction the combined weight of which necessitated Legalcom to advise Tasmanian Sandstone Quarries to inspect the plant and equipment prior to settlement or to itself arrange such inspection.
In relation to the contention that the evidence should have led to a finding that Legalcom had acted unreasonably and in breach of duty, Tasmanian Sandstone Quarries drew attention to and expanded upon the risk factors associated with the transaction, identified at trial.
It was emphasised that the plant and equipment comprised a substantial portion of the total outlay for the acquisition of the quarry and that the plant and equipment was vital for immediate production. It was pointed out that there was demonstrated hostility to the sale to Tasmanian Sandstone Quarries by a related party and that hostile party had access to the plant and equipment.
Counsel emphasised that there had been reports and rumours of threats to the assets. There had been a necessity to engage security guards at the quarry. A purported breach by Tasmanian Sandstone Quarries of the agreement for sale of the relevant assets had led to the breakout of “World War III” and there were some indications that Mr Wood was refusing to execute the agreement. In addition counsel highlighted the fact that Tasmanian Sandstone was insolvent, that a clause in the agreement protected the administrators from liability, that there was a lack of appropriate insurance to protect Tasmanian Sandstone Quarries, that there had been extended delays since inspection and settlement, that settlement was arranged to occur away from the quarry, and finally that there was a failure by the administrators to give the confirmation sought by Tasmanian Sandstone Quarries on 25 May 2000 that the assets acquired would be in substantially the same order as when inspected.
Tasmanian Sandstone Quarries submitted that the risk factors outlined were apparent and as a consequence it was incumbent on Legalcom, in order to discharge its duty of care, to advise Mr Calabrese to conduct an inspection of the premises, plant and equipment immediately prior to settlement. It was submitted further that it was incumbent on Legalcom to proceed to arrange such an inspection. It was said that an inspection was necessary to ensure that Tasmanian Sandstone Quarries had a reasonable opportunity to confirm that it was, in fact, receiving precisely what it had purchased.
It was pointed out that no inspection was arranged by Legalcom, either before or at settlement. Attention was drawn to the fact that Mr Goldberg admitted that he did not think that he turned his mind to the question of the plant and equipment prior to settlement. It was submitted that the circumstances were such that he should have turned his mind to the question of the integrity of the stock, plant and equipment. It was contended that as Mr Goldberg had an appreciation of the hostilities surrounding the quarry and the sale agreement, the need to secure the integrity of the stock, plant and equipment ought to have been apparent. It was said that letters sent by Mr Goldberg to the administrators’ solicitors, seeking confirmation that the assets would be in the same order as when inspected by Tasmanian Sandstone Quarries, confirmed that he ought to have turned his mind to ensuring that this actually occurred. It was pointed out that the administrators did not provide the assurance sought in relation to the assets and this was said to confirm the necessity for an inspection immediately prior to settlement.
Tasmanian Sandstone Quarries submitted that an inspection of the plant and equipment at settlement would have established that the plant and equipment had sustained damage and would have enabled Tasmanian Sandstone Quarries to take steps to rectify the failure of the administrators to comply with the sale agreement. It was said that rectification at that time would have been the cost of replacement of the damaged equipment, with a potential claim in respect to impairment of production. It was submitted that settlement without inspection left the administrators in receipt of the purchase monies of Tasmanian Sandstone Quarries with no sense of urgency or commitment to ascertaining the extent of damage or to proceed to rectify such damage. It was said that this contention was evidenced by the subsequent inaction of the administrators.
Tasmanian Sandstone Quarries drew attention to a number of further matters in support of its contention that Legalcom through Mr Goldberg acted in breach of duty.
Attention was drawn to Mr Goldberg’s involvement in financial arrangements, including dealings with financiers and preparation of documents. It was said that Mr Goldberg was heavily involved in the arrangements for sale, and particularly had knowledge of the steps which Mr Calabrese had taken to obtain funds to finance the asset purchase, including the details of the financiers approached. It was further said that Mr Goldberg was actively involved in collecting information from Mr Calabrese and providing it to financiers in order to assist Mr Calabrese to obtain the necessary finance. It was contended that Mr Goldberg was aware of Mr Calabrese’s financial means, aware of the high interest rate charged by one broker of 180% in respect of a particular loan, and aware of the difficulties Mr Calabrese faced in obtaining finance and the consequent delays in settlement. These matters were said to provide context to the ambit of the retainer and the scope of Mr Goldberg’s knowledge of and involvement in the transaction and, as a consequence, the scope of the duty of care owed to Tasmanian Sandstone Quarries.
Ultimately it was said that the failure of Legalcom through Mr Goldberg to turn its mind to the issue of the plant and equipment meant that the relevant duty of care was breached. It was submitted that the circumstances of the retainer were such as to put Legalcom under a duty to warn against the particular risks to the assets. It was said that there was ample material to put Legalcom on notice that some precaution needed to be taken. It was contended that there were “alarm bells” sounding out the standard of care required,[28] and that standard was not met.
[28] McManus Developments Ltd v Barbridge Properties Ltd [1996] PNLR 431.
Consideration of Alleged Breach
It is to be observed that the Judge’s conclusion that Legalcom did not act unreasonably, was made in the context of Mr Goldberg not being retained as an adviser generally and in which Mr Calabrese took on material roles and responsibilities and acted in a self-reliant manner. These matters were briefly addressed above in the assessment as to the limited nature of the retainer. In order to assess whether Legalcom acted unreasonably in failing to advise Tasmanian Sandstone Quarries to carry out a pre-settlement inspection, it is appropriate to expand on the actions of Mr Calabrese that demonstrated his self-reliance and independence from Mr Goldberg and Legalcom.
Mr Calabrese had been in discussions with Mr Wood before the appointment of administrators in respect of Tasmanian Sandstone and well before instructing Legalcom. Mr Calabrese attended the first meeting of creditors of Tasmanian Sandstone in Tasmania, prior to instructing Legalcom. Prior to this meeting, Mr Calabrese had made a private agreement with Mr Wood to make a substantial payment to Mr Wood which was not to be disclosed to the administrators or creditors.
Subsequent to the retainer, Mr Calabrese continued to act in a self-reliant manner and was involved in many aspects of the transaction without the involvement of Mr Goldberg. These matters included attending Tasmania, communicating directly with Mr Wood, communicating directly with the employees and former employees of Tasmanian Sandstone in Tasmania, communicating directly with the administrators, attending at the quarry site and communicating directly with representatives of one of the secured creditors.
The offer to purchase the quarry assets made by Mr Calabrese was made directly to the administrators and not through Mr Goldberg, although the offer was made at a time subsequent to entering into the retainer. At a time after the retainer had been entered into, Mr Calabrese personally entered into a partnership agreement with a potential bidding competitor in respect of the quarry assets. Mr Calabrese instructed Mr Goldberg of a revised offer concerning the Tasmanian Sandstone debt and the hire purchase of assets. There was no suggestion that Mr Goldberg proposed this revision to Mr Calabrese.
On 14 April 2000, Mr Calabrese entered into a written agreement with Mr Wood for Mr Calabrese to operate the cutting plant at the quarry in April 2000. It is apparent that Mr Goldberg was nether involved in drafting this agreement, nor was he asked to comment on its terms.
The business understanding and acumen of Mr Calabrese and his expectations of his legal representative, are well-illustrated by the following evidence given by Mr Calabrese in answer to a question by the Judge:
…My job was keep an eye on quarry and, you know, make sure is everything there. And make sure I don’t go into this and then I can’t make money or I need another half a million for something else. That was my main concern. But when it came to paperwork or the accountant or the lawyer, it’s his side.
The actions of Mr Calabrese as outlined demonstrate the level of involvement of Mr Calabrese in the acquisition of the quarry and the associated transactions. Ultimately, the complaint of Tasmanian Sandstone Quarries was that Legalcom did not give advice about a matter that Mr Calabrese was in a far superior position to assess and address.
Mr Calabrese was well aware that he was purchasing assets from a company in a distressed position and that others were interested in acquisition of those assets. It is evident that he was seeking to take advantage of that distressed state to obtain the quarry and related assets at a “fire-sale” consideration. Mr Calabrese visited the site in Tasmania, inspected and operated the plant and equipment, was in possession for a period between contract and settlement, was aware of the security arrangements, and was aware of the risks that might arise in regard to the transaction. These were common sense commercial considerations.
There was no reason identified for Mr Goldberg to have been called upon to give advice about these risks in the circumstances of his limited retainer. To impose the suggested obligation on Legalcom would call for a level of caution well beyond what might be expected of a solicitor advising on limited aspects of such a transaction. The contentions of Mr Calabrese would have the effect, if accepted, of turning his solicitor into an insurer or guarantor. In my view, in the circumstances of this particular matter, the suggested duty of care did not arise. The suggested breach of duty did not occur. Legalcom did not act unreasonably in failing to advise Tasmanian Sandstone Quarries to carry out a pre-settlement inspection or in failing to arrange such an inspection. Tasmanian Sandstone Quarries have not demonstrated error in the approach of the Judge.
Duty to Ensure
Tasmanian Sandstone Quarries complained that the Judge erred in failing to conclude that Legalcom breached a duty of care to ensure that Tasmanian Sandstone Quarries received plant and equipment at settlement in the same condition as when inspected and operated by Mr Calabrese. This complaint was referred to from time to time during the course of the appeal.
It should be pointed out immediately that the Judge noted that this alleged breach was not pursued at trial:[29]
… the trial was conducted on the basis that the breaches of duty relied upon were those articulated in the oral opening. In particular, [Tasmanian Sandstone Quarries] did not press the plea … that Legalcom had breached its duty by failing to ensure that [Tasmanian Sandstone Quarries] received the plant and equipment in the condition inspected and operated by Mr Calabrese.
…
…I note again that [Tasmanian Sandstone Quarries] did not pursue the claim that Legalcom had breached its retainer by failing to ensure that [Tasmanian Sandstone Quarries] received the plant and equipment at settlement in the same condition as when inspected and operated by Mr Calabrese. …
[Original emphasis]
[29] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [18],[281].
In any event, there was no foundation for a duty that Legalcom would “ensure” that Tasmanian Sandstone Quarries would receive the quarry assets at settlement in the same condition as when inspected and operated by Mr Calabrese. Such a duty did not arise in contract or in tort.
Even if that claim had been pursued, it would not have succeeded as the evidence does not support a conclusion that Legalcom had accepted such an onerous obligation.
Further Matters Relating to Liability
Tasmanian Sandstone Quarries contended that the Judge erred in failing to consider the question of whether the standard of care might differ depending on whether the duty under consideration arose pursuant to contract or pursuant to tort. It should be pointed out immediately that the matter was not addressed in this way at trial. As the Judge observed in his reasons:[30]
In its articulation of the duty and standard of care required of Legalcom, [Tasmanian Sandstone Quarries] did not distinguish between the duty arising by contract, and the common law duty of care of a solicitor. [Tasmanian Sandstone Quarries’] case was that on either basis, Legalcom should have advised it to arrange an inspection of the plant and equipment prior to settlement so as to ensure that it would receive at settlement the plant and equipment which it had contracted to purchase or, alternatively, itself to have arranged an inspection of the plant and equipment for that purpose. Legalcom denied that it owed either duty.
[30] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [207].
On appeal, Legalcom pointed out that the written submissions of Tasmanian Sandstone Quarries on this topic were confused. At one point, however, the suggestion was advanced that the duty in contract would be broader.
It is accepted that concurrent duties of a solicitor may arise in both contract and tort. In Astley v Austrust Ltd Gleeson CJ, McHugh, Gummow and Hayne JJ observed:[31]
As the learned trial judge found, it was open to Austrust to sue in contract as well as in tort. Until comparatively recently, the mutual rights and duties of a solicitor and client were regarded as regulated exclusively by the express and implied terms of the solicitor's retainer. As recently as 1939, the English Court of Appeal held in Groom v Crocker that "the mutual rights and duties of the two are regulated entirely by the contract of employment". The Court rejected an argument that liability in tort could arise from their relationship. But times change. Since that decision, the law has evolved to the conclusion that concurrent liabilities in both contract and tort may arise in cases of professional negligence. Prima facie, a plaintiff may sue a solicitor in either contract or tort or both. In Central Trust Co v Rafuse, Le Dain J, delivering the judgment of the Court, said that:
"where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequence."
[Footnotes omitted]
[31] Astley v Austrust Ltd (1999) 197 CLR 1 at [44].
The content of the duty of care was propounded by Deane J in Hawkins v Clayton as being answered by reference to:[32]
… the standard or measure of care which was reasonable in the circumstances. … namely, the care and skill to be expected of a qualified and ordinarily competent and careful solicitor in the exercise of his profession. …
However, as Bray CJ observed in Jennings v Zilahi-Kiss:[33]
…A professional man is only liable for the use of ordinary care and skill. He is not bound to guarantee against all mistakes or omissions or to be gifted with powers of divination or to exercise extraordinary foresight, learning or vigilance. …
[Footnote omitted]
[32] Hawkins v Clayton (1988) 164 CLR 539 at 580.
[33] Jennings v Zilahi-Kiss (1972) 2 SASR 493 at 512-513.
In my view, in the present case there was no relevant difference between the duty owed by the solicitor in tort and any implied contractual duty. As observed in Heydon v NRMA Ltd:[34]
… In a contract for legal services, the implied undertaking is no more nor less than to have and to use the requisite degree of skill and care. The same duty is imposed by the law of tort. In giving advice, a lawyer does not warrant or guarantee the soundness of his or her opinion but only that the requisite degree of skill and care has been used in arriving at it. …
[Emphasis added – footnote omitted]
[34] Heydon v NRMA Ltd (2000) 51 NSWLR 1 at [363] (McPherson AJA).
On appeal, Tasmanian Sandstone Quarries contended that the Judge approached the question of whether Legalcom failed to meet an appropriate standard of care by considering whether Tasmanian Sandstone Quarries, through Mr Calabrese, had met the same standard. This contention is misconceived. It is apparent that the Judge did not consider the question of whether Tasmanian Sandstone Quarries exercised care in the protection of its own interests, as either relevant or determinative of the standard of care owed by Legalcom. To the contrary, the Judge considered the capacity of Tasmanian Sandstone Quarries to protect its own interests as compared with the capacity of Legalcom to guard against the identified risks. This involved a consideration of the relative knowledge or expertise of Legalcom and Tasmanian Sandstone Quarries, and an assessment of the extent to which the matter about which it was said Legalcom ought to have advised, was a matter within the knowledge or purview of Legalcom as opposed to Tasmanian Sandstone Quarries.
It is to be observed that this consideration is also relevant to the assessment of whether Legalcom acted unreasonably in failing to advise in relation to the identified risks. The corollary of this consideration is the principle that in deciding what is required of a solicitor in a given case, the Court may bring to account the circumstance that it is the solicitor and not the client who has the better opportunity to assess the gravity of the risk involved in a particular case or in a particular transaction and that it is the solicitor and not the client who has the necessary expertise to analyse and guard against that risk.[35] However, the assessment of Tasmanian Sandstone Quarries’ ability, through Mr Calabrese, to guard against the risks, is of particular relevance in circumstances where it is apparent that Legalcom was only retained to advise in limited respects in relation to the transaction and was only appraised of discrete aspects of that transaction.
[35] Edward Wong Finance Co Ltd v Johnson Stokes & Master (A Firm) [1984] AC 296 at 307.
In any event, the Judge did not consider his assessment of Tasmanian Sandstone Quarries’ capacity to guard against the relevant risks as determinative in his assessment of whether Legalcom breached any duty of care. Rather, the Judge considered it was one of a number of factors which militated against a finding that Legalcom’s duty of care required it to advise Tasmanian Sandstone Quarries to conduct a pre-settlement inspection of the plant and equipment.
Conclusion Regarding Liability
The submissions of Tasmanian Sandstone Quarries on appeal involved a detailed repetition of the submissions advanced at trial. This Court was taken through a review of the evidence and invited to reach a different conclusion than that reached by the Judge on several important topics. Tasmanian Sandstone Quarries contended that the weight of the evidence was against the conclusions reached by the Judge. The crux of the submission on breach of duty was that the Judge’s conclusions as to reasonableness of conduct of Legalcom were inappropriate.
In my view, for the reasons discussed above, the inferences drawn by the Judge were open to him. The nature of the retainer was a critical matter. The Judge’s findings of fact were open on the evidence. I agree with his conclusion that the conduct of the solicitor, having regard to the limited retainer, was reasonable and involved no breach of duty.
Alternative Contentions
Although two alternative contentions were advanced, during the hearing of the appeal the second of the contentions was abandoned. This question related to the Judge permitting the amendment to claim damages in tort, to be backdated to the institution of the proceedings. The remaining alternative contention related to the Judge’s finding that there had been a retainer. It was submitted that given the apparent acceptance by the Judge of the existence of a tortious duty owed by Legalcom to Tasmanian Sandstone Quarries, there was no need to strain to find the existence of a contract of retainer. Reliance was placed on the observations of Lush J in MacPherson v Kevin J Prunty & Associates.[36]
[36] MacPherson v Kevin J Prunty & Associates [1983] 1 VR 573.
The question of whether concurrent duties arise in contract and in tort has been the subject of much debate for many decades. In principle, there appears no reason why concurrent duties should not arise in a particular case. As earlier discussed, the High Court in Astley v Austrust Ltd[37] provides confirmation for the above proposition.
[37] Astley v Austrust Ltd (1999) 197 CLR 1 at 130 and 142; the observations of the High Court in Bryan v Maloney (1995) 182 CLR 609 provide further support for the co-existence of the causes of action.
In the present proceeding, the evidence justified a conclusion that a duty of care was owed both in contract and in tort and that the extent and reach of the duty was the same. The Judge’s approach in this respect did not involve a “strain” to find the existence of a contract, as the existence of that contract was supported by the evidence.
Damages
Although it is unnecessary to do so, as observed above, I propose to briefly express my views on the topic of damages.
The Judge undertook an exhaustive review of the claim for damages and concluded that the primary claim of Tasmanian Sandstone Quarries, being a claim for additional profits which could have been earned, was misconceived. This was a result of the pleaded case that Tasmanian Sandstone Quarries would not have proceeded to settlement had it known the true condition of the plant and equipment as at the date of settlement. On the hypothesis that Legalcom had properly performed its obligations, the contract would not have gone ahead. In those circumstances no question of loss of profits could arise. As the Judge noted:[38]
In cases such as the present therefore in which a purchaser claims that it would not have proceeded with the transaction if properly advised, the loss resulting from a negligent solicitor’s conduct or omission is ordinarily ascertained by comparing the position which the purchaser would have been in had the solicitor discharged his or her obligations, on the one hand, and the position of the purchaser by having proceeded with the transaction in ignorance of the true state of affairs, on the other.
…
The underlying principle is that the victim of a tort is entitled, by way of damages, to a sum of money which will place it in the same position in which it would have been had the tort not been committed. Achieving that purpose requires some flexibility. This means that the diminution in value method of assessment should not be applied inflexibly and may not always be appropriate.
…
[Tasmanian Sandstone Quarries] made no attempt at all to establish the difference between the total consideration which it had paid, on the one hand, and the value of the quarry assets in their condition as at 19 June 2000, on the other. Nor did [Tasmanian Sandstone Quarries] seek to make out a case of wasted expenditure. Nor did it mount a claim for losses incurred by it in operating the quarry to mitigate its losses while it attempted to extricate itself from the purchase, or while it made attempts to sell the quarry.
…
Subject to the identification later in these reasons of the small loss incurred by [Tasmanian Sandstone Quarries] in the first two years of its operation of the quarry, it is not possible therefore to make any assessment on [Tasmanian Sandstone Quarries’] primary claim of damages for losses of the conventional kind suffered when a purchaser enters into a contract which it would not have done had its solicitor not been negligent. This means that, subject to the alternative way in which it put its claim, [Tasmanian Sandstone Quarries] would, had it established a breach of contractual duty, have been entitled to nominal damages only.
[38] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [270],[273],[276], [279].
Tasmanian Sandstone Quarries advanced an alternative claim for loss of commercial opportunity. In rejecting this claim, the Judge observed:[39]
This claim must fail. It simply cannot be said that the loss of a commercial opportunity to exploit the plant and equipment at the quarry, as alleged in paragraph 38.1, resulted from the breach of duty attributed to Legalcom. Legalcom did not cause the damage to the plant and equipment which had the effect that [Tasmanian Sandstone Quarries] was denied the opportunity which it alleged. That opportunity was lost by the actions of the person or persons who damaged it, and, on any view, that was not Legalcom. I note again that [Tasmanian Sandstone Quarries] did not pursue the claim that Legalcom had breached its retainer by failing to ensure that [Tasmanian Sandstone Quarries] received the plant and equipment at settlement in the same condition as when inspected and operated by Mr Calabrese. Even if that claim had been pursued, it would not have succeeded as the evidence does not support a conclusion that Legalcom had accepted such an onerous obligation.
[Original emphasis]
[39] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [281].
The primary complaint on appeal was that the Judge did not give proper weight or effect to the expert accounting evidence as to loss. It was contended that in the absence of conflicting expert testimony or direct challenge through cross-examination, the Judge was bound to accept and give effect to that testimony.
The difficulty with this approach is that it overlooked the serious limitations of the evidence. The Judge in a careful analysis identified those limitations as follows:[40]
[40] Tasmanian Sandstone Quarries Pty Ltd v Tasmanian Sandstone Pty Ltd & Ors [2009] SASC 111 at [356]-[359],[361]-[363].
[Tasmanian Sandstone Quarries’] claim for expectation losses relied very much on the evidence of Mr Ellery, an accountant. Mr Ellery offered an opinion as to the losses suffered by [Tasmanian Sandstone Quarries] “as a result of damage to equipment of the business of [Tasmanian Sandstone] prior to settlement on its purchase in June 2000”. When preparing his reports, Mr Ellery was not asked to, and did not, address separately the losses said to result from any breach of duty by Legalcom.
The loss of profits resulting from damage to the plant and equipment depended upon the processing capacity of the quarry, on the one hand, and the potential to sell the processed stone, on the other. As to the processing capacity of the quarry, Mr Ellery assumed that the quarry had the potential to produce four shipping containers of stone each week. Four shipping containers of stone per week equated to 16,000 m2 or 1,800 m3 of stone per year. Mr Ellery also assumed that the processed stone would have realised an average sale price of $160 per m2.
…
As to the potential market for stone from the quarry, Mr Ellery assumed that the stone could have been sold in all states of Australia apart from Western Australia. He reached an assessment of the amount of stone which [Tasmanian Sandstone Quarries] could have sold by two means. First, Mr Ellery surmised that [Tasmanian Sandstone Quarries] could have sold four containers of stone each week for 50 weeks in each year …
There a number of difficulties with the process of reasoning contained in these steps. The means by which the total Australian market was identified was, with respect, unreliable. But even if it be correct, it is another step altogether to conclude that it was that market which was available to [Tasmanian Sandstone Quarries], a relatively small stone producer in Tasmania. It was another step again to assume that [Tasmanian Sandstone Quarries] could have sold all its quarried stone in that market. Those assumptions take no account of the transport and distribution costs which would have been incurred by [Tasmanian Sandstone Quarries] in getting its stone to the mainland market; customer purchasing preferences and purchasing patterns; and the competitive response of other participants in the market. There was also evidence that some sandstone is imported into Australia from China and sold at much cheaper prices than those charged by Australian producers. This process of reasoning took no account of the impact of imports.
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The second approach to the potential sales adopted by Mr Ellery was based on information given to him of actual sales of stone from the quarry. The steps involved in this second path were these:
(i) Sales of stone to the value of $75,000 had been made by [Tasmanian Sandstone] in 1999 to Rock Around The Block (RATB), a Sydney company.
(ii) Between June 2000 and October 2000, four containers at a value of $56,000 had been delivered to [Rock Around The Block], but were rejected on quality grounds (attributable to the poor quality of the cut made by the Bridge Saw).
(iii) On this basis, annual sales of approximately $200,000 could have been expected to [Rock Around The Block].
(iv) Sales of stone to the value of $40,000 were made to Sydney Stone Company in the period between June 2001 and March 2002. More could have been sold if there had not been difficulties with the quality of the stone cuts.
(v) It is reasonable to assume that sales of $250,000 per year could have been made to Sydney Stone Company.
(vi) There were numerous purchasers in Adelaide whom [Tasmanian Sandstone Quarries] had been unable to supply.
(vii) It was reasonable to surmise therefore that additional annual sales could have been made as follows:
NSW $450,000
Victoria $300,000
Queensland $200,000
South Australia $200,000
Total: $1,150,000
(viii) Additional sales of $1,150,000 per year represented approximately 90 additional containers of stone each year.
(ix) As in each of the years 2001 and 2002, 23 containers were actually dispatched from the quarry, 90 additional containers represented less than three containers of stone each week. (It is to be remembered that some stone would be sold in Tasmania and not shipped in containers).
Mr Ellery then made some calculations of the extra production costs which would have been incurred in producing an additional three containers of stone each week. Using the assumed sale price of $160 per square metre, he calculated an ongoing annual net loss of $396,000.
There are difficulties with this process of assessment as well. On its face, it does appear to draw some support from the evidence of [Tasmanian Sandstone] transport contractor, Mr Hurst. He produced documentation indicating that in the five months from July to November 1999 inclusive, 45 containers of stone were shipped from the quarry. That figure can be extrapolated to 108 containers per year. However, for much, if not all, of that period the quarry was operating with two shifts, each of twelve hours. That prevents a direct comparison with [Tasmanian Sandstone Quarries’] operations at the quarry. [Tasmanian Sandstone Quarries] could of course also have operated with two shifts but, in that event, its operating costs would have substantially increased.
With respect, I agree with this analysis. The accountant did little more than undertake hypothetical exercises. The necessary analytic factual assumptions were not established. The evidence was in my view of limited use and limited weight.
Once this challenge is rejected, any damages award that may have flowed to Tasmanian Sandstone Quarries would have fallen short of the settlement recovered from the administrators.
Conclusion
I would dismiss the appeal.
KOURAKIS J: I also agree that the appeal should be dismissed for the reasons given by Gray J.
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