Timothy John O'Brien (Appellant) v Percival Stanley Clayton (Respondent) and John O'Callaghan, Brian Hennig, O'Callaghan Hennig and Co Pty Ltd and Hennig and Co Pty Ltd (Respondents) John O'Callaghan, Brian Hennig,

[1994] SASC 4783

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA OLSSON J

CWDS
Negligence - essentials of action for negligence where economic or financial loss - careless advice, statements and non-disclosure Appeal against magistrate's award of damages to plaintiffs against third parties - defendant vendor and plaintiffs purchasers of land instructed a solicitor to prepare a contract for the sale and purchase of the land, and to convey the land from the vendor to the purchasers - sale part of a scheme whereby land owned by the vendor would be subdivided, so that a small portion could be retained by him and the rest sold to the purchasers - solicitor consulted planning consultant who advised that the proposal would only be approved by the relevant planning authority if the land being sold was consolidated with the purchasers' adjacent landholding - vendor and purchaser executed contract, a condition of which was that the contract be subject to all necessary consents and approvals, and that the parties would do all things necessary to obtain them - planning consultant submitted a planning application but failed to provide in it for the consolidation of the land with the purchasers' existing landholding - an officer of the planning authority advised planning consultant that the application could not be processed on basis submitted, but indicated that it might be approved if the vendor retained a larger part of his land planning consultant passed on that information to solicitors vendor, wishing not to proceed with the sale, believing the consideration to be wholly inadequate, contacted the solicitor - solicitor advised vendor that, in light of the information received from the planning consultant, he could legitimately terminate the contract - vendor purported to terminate contract - meanwhile, planning consultant submitted a new planning application, incorporating the consolidation of the land with the purchasers' land, which received consent after vendor's purported termination - after consent issued, solicitor advised vendor that the sale could proceed - thereafter both parties advised to seek independent legal advice, which they did - vendor failed to settle - purchasers sued vendor, who joined solicitor and planning consultant as third parties - magistrate found that vendor not entitled to terminate contract, but ordered that, as the third parties had negligently advised the vendor, they should be liable to vendor for the damages awarded to the purchasers for the vendor's breach of the contract - third parties appealing the finding of negligence on their part and alleging that the damages awarded against them should be reduced in light of the vendor failing to proceed with the contract after the consent had issued - finding of negligence upheld - planning consultant, in failing to initially proceed with the application in the manner which it previously indicated would be necessary, was negligent - solicitor, having been consulted by the parties to implement the transaction, was negligent for failing to realise advice of planning consultant incorrect and to question it.

Negligence - essentials of action for negligence damage - causation - Negligence of solicitor and planning consultant caused plaintiff's loss and the third parties unable to discharge the onus of establishing a novus actus interveniens - the failure of the vendor to settle, once he became aware consent granted, not breaking the chain of causation, as no evidence that he was ever advised that he was bound to proceed - advising parties to seek independent advice could not itself break the chain of causation.

Damages - general principles - mitigation of damages - Argument of third parties as to causation amounting to argument that vendor had failed to mitigate the loss he was seeking to recover from them - defendant in a third party action under the same obligation to mitigate loss as a plaintiff in an ordinary action - observations as to what was the obligation to mitigate loss - not a duty to minimise loss, but an obligation to undertake all reasonable steps to mitigate loss - here vendor did not act unreasonably in failing to settle after consent had issued, as never advised that bound to proceed. March v E and M H Stramare Pty Ltd and Anor (1991) 171 CLR 506; Barclay's Bank v Tom (1923) I KB 221; Sotiros Shipping Inc and Aeco Maritime SA v Samceiet Solholt (1983) 1 Lloyd's Rep 605; Falko v James McEwan and Co Pty Ltd (1977) VR 447 and Jamel v Molla Dawood Sons and Co (1916) AC 175, applied. Nesseler and Anor v Lennon and Woosnam (Court of Criminal Appeal (Qld), 14 May 1993, unreported), discussed.

HRNG ADELAIDE, 8-9 September 1994 #DATE 20:9:1994

Counsel for appellant T J O'Brien:     Mr N W Morcombe QC
   with Mr S H Milazzo

Solicitors for appellant T J O'Brien:    Daenke O'Donovan

Counsel for appellants John O'Callaghan Brian Hennig, O'Callaghan Hennig and Co P/L and Hennig and Co P/L:   Mr D J Meyer

Solicitors for appellant John O'Callaghan Brian Hennig, O'Callaghan Hennig and Co P/L and Hennig and Co P/L::   Michell Sillar
  Lynch And Meyer

Counsel for respondent P S Clayton:     Mr D W Smith

Solicitors for respondent P S Clayton:    White Berman

Counsel for respondents T S and L J Sparkes :   Mr M G Pickhaver

Solicitors for respondents T S and L J Sparkes:  John M Penrose

ORDER
Appeals dismissed.

JUDGE1 OLSSON J These are two separate appeals prosecuted by third parties to proceedings in the Magistrates Court (Civil Division). Following a very lengthy trial on oral evidence, Mr A.J. Cannon SSM, in effect, upheld the plaintiffs' claim and, inter alia, entered judgment for $30,000 against the defendant. In third party proceedings between the defendant and each of the present appellants the learned magistrate upheld the defendant's claim to indemnity and apportioned liability to make that indemnity as to 20% against the appellants John O'Callaghan, Brian Hennig, O'Callaghan Hennig and Co Pty Ltd and Hennig and Co Pty Ltd; and as to 80% against the appellant Timothy John O'Brien ("O'Brien").

2. The several appellants contend that no liability at all ought to have been found in relation to them, or, alternatively, that the damages assessed are excessive. An issue was also raised as to whether then apportionment of damages as between the third parties was appropriate.

3. There is no appeal against the judgment entered in favour of the plaintiffs against the defendant. Nor, as I understand the issues ventilated on the appeal, is there serious challenge to many of the relevant narrative facts found by the learned magistrate. Rather, the present appellants principally seek to impugn the inferences and conclusions derived by the learned magistrate from the facts as found.

4. I therefore initially attempt a resume of those facts.

THE NARRATIVE FACTS
5. Like the learned magistrate, I commence with an identification of the dramatis personae in this most unfortunate saga, the legal costs of which are now obviously utterly disproportionate to the financial stakes in issue.

6. The defendant Percival Stanley Clayton ("the defendant") was, at all material times, a retired railway worker. He was a single man of limited education who suffered a stroke in about 1987, at the age of about 54. This, in effect, signalled the end of his working life. He was hospitalised for a substantial period of time. Having exhausted his sick leave entitlement, he retired from his employment.

7. At the time of his incapacity the defendant lived and worked at Mt Gambier, although his family were located in the Riverland.

8. Following his discharge from hospital, he utilised his superannuation payout and other benefits to purchase a Crown leasehold property at Barmera. This comprised some 11 acres of land, with a transportable type home in one corner. I shall compendiously refer to it as "the subject property". The land had irrigation rights, which attracted an ongoing liability of $1,500 per annum for water rates. It was, however, unused for horticultural purposes at time of purchase, because vines previously planted on it had been removed as part of a so-called "vine pull" rationalisation scheme. It appeared that it was impractical to use the land for other horticultural pursuits until the irrigation channel facilities on the property were upgraded. The property was apparently somewhat run down.

9. The defendant's sole income was a pension and he was limited in his residual physical capacity. For those reasons the land remained unproductive after he acquired it. It became a matter of some concern to him that water rates were continuing to accrue at $1,500 per annum.

10. The learned magistrate found that, at and following his relocation to Barmera, the defendant was in a state of declining health. He had been left with some loss of function on his left side and "his doctor thought that there were indications of some loss of mental ability, due to excessive alcohol consumption".

11. The defendant had a number of relatives in the general area, with whom he maintained a degree of contact. These included his brother Alby, Alby's wife Shirley and their two children Michael and Kym.

12. Against that background it next becomes appropriate to bring upon the scene a second actor in the present saga. Alby's daughter Kym ultimately married one Michael Loder ("Loder"), who had been a district nurse responsible for visiting and treating the defendant, as necessary.

13. The evidence is somewhat confused on the point but, as I glean the position, the obvious inference to be drawn is that Loder and Kym Clayton had some form of relationship from about mid 1990. Certainly, on 13 November 1990, the two of them jointly entered into a contract to purchase a block of land at Lyrup. The significance of such a situation is, of course, that, as at times relevant to these proceedings, it must be inferred that the relationship between Loder and the defendant's close relatives was by no means arm's length. It seems obvious that, on the contrary, he was closely identified with them and their expressed attitudes. He was also a person with a somewhat autocratic personality.

14. According to the evidence, the defendant, having had what was described as some form of "dizzy" turn, was hospitalised for a time, on 7 August 1990, and later transferred to a nursing home in Adelaide on 27 August 1990, where he seems to have remained for some time. He subsequently returned to a nursing home at Barmera, but never resumed occupancy of the subject land. At one stage it was in fact occupied by Loder himself, rent free, for about twelve months.

15. On 16 October 1990 the defendant executed a power of attorney in favour of Loder, the document apparently having been prepared by O'Brien. This seems to have occurred at the suggestion of Loder (T277). It is to be noted that, on 22 August 1990, Loder had made application that the defendant be subject to the protection of the Guardianship Board. However, that application was ultimately dismissed, because the statutory criteria had not been made out.

16. That brings me to Mr and Mrs Sparkes, who were the plaintiffs in the action. I shall refer to them as "the plaintiffs". They purchased a property adjacent to the subject property at the end of 1988; and thereafter worked it as an agricultural enterprise. They also were not persons of great education. Indeed the male plaintiff was virtually illiterate, albeit an honest, hardworking man. Following their arrival, the defendant visited them quite regularly - he was a lonely person.

17. Over a period of time the plaintiffs and the defendant discussed the possibility of the former purchasing all but one acre of the subject land with the house on it ("the house block"). As the learned magistrate pointed out, such a proposal had considerable advantages for both parties. On the one hand the plaintiffs would acquire a useful adjunct to their property. On the other, the defendant would rid himself of a burden of $1,500 per annum in water rates, be able to clear all of his debts and potentially have some modest surplus.

18. In that context the next actor came into the unfolding scenario. The appellant O'Brien had been a solicitor in practice in Berri for many years, with substantial experience in property transactions in the Riverland. He had attended to conveyancing work for the plaintiffs when they purchased the property adjacent to the subject property. He also later performed like work for Loder and Kym Clayton in relation to the joint acquisition by them of the Lyrup block.

19. On 11 April 1989 the plaintiffs and the defendant jointly attended O'Brien concerning a proposal to effect a sale along the lines of that above described. He gave them some general advice, following which he consulted with O'Callaghan Hennig and Co, a firm of surveyors and planning consultants.

20. One O'Callaghan, a principal of that Company, wrote to O'Brien on 19 April 1989. The relevant substance of that letter was expressed as follows:-
    "Re: Percival Stanley Clayton - Sec. 99 Cobdogla
    Irrigation Area

We have looked at the proposal to excise Mr. Clayton's
    house from Section 99 Cobdogla Irrigation Area, but we
    find that he does not meet the occupancy requirements of
    the Zoning Regulations of the District Council of Barmera.

Any application to simply excise the house and surrounding
    lands up to one hectare to create one allotment with the
    balance of Section 99 remaining the second allotment,
    would be refused by the District Council of Barmera.

We understand, however, that an adjoining neighbour wishes
    to purchase the balance of Section 99.

An application to excise the house from Section 99 and
    then consolidate the balance of Section 99 with an
    adjoining section to create the second allotment, could be
    consented to by the District Council of Barmera.

The current policy of the Department of Lands is that when
    the house is excised from a section, that house allotment
    is to be made freehold. The basis of this policy is that
    the Department will not issue any new leases and any new
    allotments must be made freehold.

In this particular instance, no new leases are being
    created. As the two existing leases could still remain
    two leases, but of different sizes, one would imagine that
    the freeholding policy would not apply. (refer to the
    division between Mr. Ibrahim and Mr. Schell at Loxton).
    However, Mr. Doug Fairman of the Department of Lands,
    Berri has advised me that in this case, the freeholding of
    the house block would be required.

If the freeholding of the house block is to be any problem
    to Mr. Clayton, then it is worth further discussion, but
    if the freeholding is no problem, then we could proceed in
    the normal manner."

21. On 3 May 1989 O'Brien sent a copy of that letter to the plaintiffs as an enclosure with a letter, which he wrote in these terms:-
    "3 May 1989
    Mr Trevor Sparkes
    Box 680 PO
    BARMERA SA 5345

Dear Sir:

We refer to your recent attendance upon us regarding the
    proposed purchase of portion of the property owned by
    Mr Clayton and enclose herewith a copy of a letter of
    report that we have obtained from Surveyors.

As you can see, the only way of proceeding with the
    proposal is that the land that you are purchasing from
    Clayton is consolidated with your existing property.

You will also note the requirement of the Department that
    a freeholding of the title which would issue for the house
    section being retained by Mr Clayton. As a general
    estimate you might expect an additional $1,600-00 to be
    payable on that account.

We would be obliged if you would let us have your
    instructions after you have considered the above."

22. Nothing further transpired until 17 April 1990, when the plaintiffs and the defendant again called on O'Brien. They told him that they had arrived at a firm agreement whereby the defendant would sell the subject property, less the house block, to the defendants for a purchase price of $10,000.

23. I pause at this juncture to note that Loder and the defendant's brother later came to the conclusion that this consideration was totally inadequate; and that the transaction amounted to what they labelled a "rip off" by the plaintiffs - particularly because of the fact that the defendant had originally paid $37,500 for the subject property as a totality. They, in concert with the defendant (who had obviously been persuaded by them to that view), persisted in that stance at trial, asserting that the arrangement ultimately entered into was unconscionable.

24. The learned magistrate quite properly rejected such a proposition and, on the evidence, concluded that, for reasons which I need not here recite, the proposal was fair and reasonable. The validity of that finding is not now challenged and it seems obvious that Loder and the defendant's brother did not, at all material times, adequately appreciate the relevant issues involved.

25. Be that as it may, at the request of the plaintiffs and the defendant, O'Brien prepared an agreement for sale and purchase in respect of the subject land, less the house block, for the basic consideration of $10,000. This was signed by the parties on 13 July 1990.

26. It is unnecessary to recite all of the detailed provisions of that agreement. It will suffice merely to indicate that the document, inter alia, stipulated that:-
    - as from 1 July 1990, the plaintiffs were entitled to
    what was described as "working possession" of the land
    agreed to be sold
    - settlement was to be 14 days after the defendant was in
    a position to give good title
    - the plaintiffs were initially to pay all costs of survey
    and subdivision (including freeholding, Engineering and
    Water Supply Department charges and costs of new titles),
    but such expenses were to be offset against the purchase
    price at settlement.

27. The agreement was expressed to be subject to several conditions. However, that which is of importance for present purposes was contained in clause 8, which read as under:-
    "CONSENTS AND APPROVALS

This agreement is subject to the consent in writing of all
    necessary consents (sic) required by the provisions of the
    Planning Act and The Real Property Act and the parties
    hereto undertake promptly to do all things and sign all
    documents required for the obtaining of such approvals as
    soon as practicable."

28. On the instructions of the parties, for all of whom he was acting (notwithstanding the obvious conflict of interest), O'Brien wrote to O'Callaghan Hennig and Co Pty Ltd on 18 July 1990, requesting that company to proceed to take such technical action as was necessary to effect the proposed subdivision - the first steps being the carrying out of the requisite survey and the securing of planning approval to the transaction.

29. The evidence indicates that, by mid August 1990, the defendant's brother Alby had sought legal advice from two separate solicitors, asserting undue influence by the plaintiffs on the defendant to consummate what was alleged to be an agreement for inadequate consideration. It seems to me that it is not without significance that, at about the same time, Loder lodged his protection application with the Guardianship Board.

30. On 11 September 1990 an account for $2,078.29 for survey work and for making application for planning consent was rendered by O'Callaghan Hennig and Co Pty Ltd. It appears that O'Callaghan had retired from the Company and the matter had been taken over by another principal, one Hennig. It is important to note that such account was addressed to O'Brien's firm, as the instructing client, and not to either the plaintiffs or the defendant. The account was duly paid by the plaintiffs at the request of O'Brien, prior to any intimation to them that any planning approval problem existed.

31. Receipt of that account was followed by a letter written by Hennig to O'Brien and couched in these terms:-

    "September 17, 1990

O'Brien, Andrew and Partners,
    Barristers and Solicitors,
    Riverview Drive,
    BERRI, S.A. 5343

Dear Sir,

Re: Division of Land - P.S. Clayton
    Sec. 99 Cobdogla I.A. - Your Ref. TJOB:JKD 490

We have been advised by the Planning Officer from the
    District Council of Barmera, that the above mentioned
    application is likely to be refused by Council in its
    present form.

The zoning regulations for the area clearly state that an
    allotment of less than one hectare cannot be created. The
    Planning Officer would allow us to amend the present
    application before issuing a refusal, but we would need to
    do this immediately. We believe there could be some
    physical problems with increasing the existing allotment
    to one hectare in size.

We will await your immediate reply, so we can amend the
    plan, otherwise a refusal will issue.

We attach a copy of portion of the zoning regulations
    relating to this application. We also attach a copy of
    the plan presently being considered."

32. Shortly afterwards Hennig received a letter dated 4 October 1990, written by the Planning Officer of the District Council of Barmera, the substance of which was to the following effect:-
    "RE - LAND DIVISION 757/D007/90
    SPARKES - CLAYTON

Your application in respect of Sections 99 and 101
    Nookamka Division, Cobdogla Irrigation Area, is unable to
    be proceeded with.

The Development Plan for the District Council of Barmera
    prohibits land division other than land division set out
    in Principles 2 and 3 of the Horticulture Zone. A copy of
    the relevant Principles are attached and highlighted for
    your interest.

The proposal in this case would satisfy the requirements
    of Principles 2(a) if the proposed allotment 1 (one) were
    to be a minimum size of 1 (one) hectare.

I am given to understand that an amendment to the plan is
    not possible due to some contractual complications between
    the owners.

Accordingly it is not possible for the plan to be approved
    in its present form.

Please contact this office if you have any queries in
    regard to this application."

33. A copy of this was also transmitted by Hennig to O'Brien.

34. It will be noted that neither letter indicated a refusal of consent, but merely stated that the plan could not be approved in its then present form. This was because Hennig had merely lodged a bare application for subdivision, without indicating consolidation with the plaintiffs' adjacent property, as originally contemplated by O'Callaghan.

35. The evidence indicated that, on 12 October 1990, O'Brien communicated the substance of this correspondence to the male plaintiff by telephone. It does not appear that O'Brien also notified this situation direct to Loder or the defendant, although they clearly came to know of it, apparently by virtue of a copy of the Council letter having been sent by someone to the defendant care of his brother's residence (T274).

36. What is surprising is that O'Brien took no immediate steps to question the situation, which was in total discord with O'Callaghan's original advice. This is the more so as the Planning Officer's letter, on the face of it, rendered it apparent that Hennig's application did not appear to have been of the type originally envisaged and advised by O'Callaghan.

37. Once again it is necessary to pause to reflect upon the situation as it stood at 12 October 1990.

38. It seems to me, as it seemed to the learned magistrate, that Hennig was, seemingly, unaware of the advice originally tendered by O'Callaghan as to the relevant method of gaining the requisite consent (which involved what was known as a "Part 3" application) and, in dealing with the Planning Officer and O'Brien, failed to direct his consideration to that option - a procedure which, I infer, must have been well known to a person holding himself out as having expertise in the relevant discipline. Equally, as I have indicated, it is quite inexplicable why O'Brien (an experienced solicitor), having received Hennig's letter, did not immediately challenge the latter and demand to know why the procedure originally adverted to by O'Callaghan could not be (and had not been) availed of. He did not do so.

39. I resume the narrative.

40. On 16 October 1990 O'Brien was consulted by Loder and the defendant. Loder testified that he asked O'Brien to explain the situation to him, as it then stood, and that the latter did so. Loder conceded that he told O'Brien that "the family were jumping up and down". He indicated that, in response to O'Brien's urging that the matter be reprocessed on the basis of retaining one hectare with the house, he told the latter that "If there's something crooked here, let's finish it here now, and get out of it, walk away from the whole thing". He claimed that the defendant was adamant that he did not want "to go ahead with it".

41. The learned magistrate accepted that O'Brien gave Loder specific advice to the effect that it was, in the circumstances, open to the defendant lawfully to terminate the agreement by an appropriate notice in writing; and that O'Brien prepared the power of attorney previously referred to, from the defendant to Loder.

42. As a consequence of that discussion and following execution of the power of attorney, Loder prepared and signed a letter in the following form:-
    "14.11.90

Dear Mr and Mrs Sparkes,

Further to our recent discussion throughout the month of
    October, regarding a contract you entered into with
    Percival S. Clayton for the purchase of a portion of his
    property situated at Jones Road Barmera, I now offer the
    following clarifications.

As previously mentioned by both myself, and Mr Tim O'Brien
    solicitor of Berri, to yourselves, Mr P.S. Clayton no
    longer wishes to proceed with the contract in its present
    form, or any revised form. The necessary consents and
    approvals, have not been obtained, and as a consequence,
    the contract is now terminated immediately as of 15.11.90.

Having discussed this matter at length with Mr Sparkes on
    several occasions, and having spoken to Mr T. O'Brien
    also, I feel I can dispense with any period of 7 days
    notice as both parties have been aware of the situation
    for some weeks.

This letter serves the purpose of written notification of
    termination of contract, and will avoid any further
    misunderstanding by both parties, if any existed.

Yours,
    M.S. LODER, RN RPN (signed)
    Acting under Power of Attorney for P.S. Clayton."

43. There is no doubt that Loder served this letter on the plaintiffs on 15 November 1990 in a most officious manner, but the learned magistrate was not prepared to accept all of Loder's evidence as to the whole of the circumstances, as they transpired, at about that time. Loder sought to infer that the plaintiffs, in effect, indicated an acceptance of the rescission, but the learned magistrate rejected such a proposition. All that need be said about that is that there was cogent evidence to support the view of the learned magistrate. True it is that the plaintiffs were prepared to at least enter into negotiations to attempt to settle the impasse which arose, but, quite clearly, they at no stage accepted the repudiation, or abandoned their contractual rights. On the hearing of this appeal there was a general agreement that the learned magistrate's finding in this regard could not be impugned.

44. Prior to the service of the notice of purported rescission (and on 23 October 1990) the plaintiffs consulted O'Brien as to what options were available. This led to certain oral negotiations with Loder through O'Brien, but these proved abortive - due to the nature of demands made by the former. On 31 October 1990 the male plaintiff telephoned O'Brien. In the course of the resultant conversation he became angry and terminated O'Brien's instructions.

45. However, on 1 November 1990, O'Brien (without the apparent knowledge of any of the parties) wrote to Hennig drawing attention to the original advice given by O'Callaghan and asking that, in the circumstances as they had developed, the fees paid by the plaintiffs be refunded. Inter alia, O'Brien said:-
    "Mr O'Callaghan assured the writer that there were no
    problems with this subdivision and that consents would
    issue, but on the basis that Sparkes would have to
    amalgamate the land being transferred with the land he
    already owned."

46. There can be no doubt that, for the first time, this letter must have caused Hennig to realise that a Part 3 application ought to have been mounted and should succeed. On 23 November 1990, without further reference to anyone, he wrote to the Planning Officer of the Council raising the issue and requesting that the matter be dealt with as a Part 3 application. This elicited a response from the Planning Officer, dated 27 November 1990, seeking some additional information and indicating that the matter would be brought before Council on 5 December 1990. Hennig responded the next day, providing the requested information.

47. Council resolved, on 5 December 1990, unconditionally to approve the application pursuant to Part 3. It thereafter sought the requisite concurrence of the South Australian Planning Commission. That concurrence was duly forthcoming and, on 7 February 1991, the Council issued planning approval for the purposes of the agreement for sale. The plaintiffs were informed of that situation by Hennig - in a letter which he wrote to the male plaintiff on 12 February 1991. Copies of the letter were also sent to the defendant and to O'Brien.

48. It is fair to say that, prior to 12 February 1991, neither the plaintiffs nor the defendant or Loder were aware of any of Hennig's activity which led to the ultimate issue of the consent.

49. Hennig's letter was apparently ignored by the defendant and, on 18 March 1991, Loder signed a sole agency agreement with a land agent authorising him to effect a sale of the whole of the subject property. On the same day O'Brien sent Loder relevant forms for signature to give effect to the approved subdivision.

50. On 27 March 1991 Loder arranged a meeting at O'Brien's office, at which he, the defendant and the two plaintiffs attended. This meeting did not resolve the matters in contention. The outcome was that O'Brien informed the parties that, if they remained in dispute, he could not act for either party.

51. This meeting was followed by a somewhat acrimonious letter written by Loder to O'Brien, questioning him as to upon whose authority Hennig had proceeded to secure planning approval. O'Brien responded and confirmed that he could no longer act for either party.

52. It is clear that, thereafter, both the plaintiffs and the defendant sought separate, independent legal advice. The defendant (as represented by Loder) remained obdurate, as a consequence of which the present proceedings were initiated on 26 July 1991.

THE ISSUES
53. Mr Morcombe QC, of senior counsel for O'Brien, and Mr Meyer, of counsel for the other appellants, both took, as their commencement point, the proposition that, by virtue of the intimations by both Hennig and the Planning Officer in mid September and early October 1990 (as earlier reproduced in these reasons), the rescission by Loder of the agreement for sale was valid; and was thus effectual in terminating that contract. So, it was said, the plaintiffs' claim in law fell to the ground and the third party claims with it, notwithstanding that the plaintiffs had, in fact, secured a judgment against the defendant which had not been appealed against.

54. As to that contention it must be said that any comfort sought to be drawn by the appellants from the reasoning of Scrutton J (as he then was) in Embiricos v Sydney Reid and Co (1914) 3 KB 45 is illusory. That case related to a charter party in relation to which, on the evidence, a situation had arisen whereby it appeared that there was no reasonable probability that the charter would be able to proceed, due to the imminent formal declaration of war between Turkey and Greece. The defendants elected to decline to proceed with the charter party, relying on an exclusion clause rendering the contract null and void in case of blockade due to war. Scrutton J upheld the action of the defendant upon the basis that, at time of election, the identified exclusion peril had arisen; and that, notwithstanding that the restraint on shipping was, in fact, later unexpectedly removed for a short period, there had been no breach of the contract.

55. That is a far cry from the instant case. In the first place the defendant had no justification for concluding that a rejection of planning approval had actually taken place or was inevitable. At most there had been an informal intimation that the application for planning approval could not be processed in its then current form. More importantly, the contract between the parties expressly required each of them positively to do all things necessary for obtaining the requisite approvals. Whilst it is true that this is not to be taken as enjoining them to go to undue expense or practical steps to secure an approval, it did at least require them to take all reasonable steps to attempt to secure the requisite consent. As later events readily disclosed (and as the correct initial advice of O'Callaghan forecast) the resolution of the initial difficulty actually presented little problem. Indeed that difficulty was of Hennig's own making.

56. Moreover there is some evidence that Loder well knew of the original advice, although, to be fair, the evidence became somewhat confused on that point. On the other hand he seems to accept the proposition that, as at the discussion on 16 October 1990, he was aware that there was an alternative basis on which planning consent could probably be secured (T331A), although, on the other, he later denied that proposition (T332). Whatever may be the true situation he seems to have become aware of that fact by, at latest, soon after 16 October 1990, although there may be doubt as to precisely when. This is not unimportant, because it was not until 15 November 1990 that he delivered the notice of purported termination.

57. Whatever may have been the precise situation in that regard, there is simply no sustainable basis, on the evidence, for upholding the proposition that, on 15 November 1990, Loder effectively and lawfully terminated the agreement for sale, consequent upon a positive refusal of consent by the Council. The learned magistrate therefore correctly rejected that thesis.

58. It was further argued, on behalf of the third parties, that the learned magistrate had fallen into error in concluding that they had been guilty of negligence, even assuming that Loder's purported rescission of the agreement was not lawful and had thus properly been rejected by the plaintiffs.

59. As to O'Brien it was put that it was always understood by the plaintiffs and the defendant that he was not an expert in planning matters and that the taking of the necessary steps would be the sole responsibility of Hennig. Thus, it was declaimed, if negligence there was, then the fault was solely attributable to the latter.

60. Such a contention ignores the practical realities of the matter.

61. It must firmly be borne in mind that both the male plaintiff and the defendant were simple, ill educated people who, it is to be inferred, had no real appreciation of the technical niceties of what was required to effect the transaction upon which they had agreed - given the earlier written advice tendered to them by O'Brien, supported by a letter which he had received from O'Callaghan at the time.

62. The parties simply went to him as an experienced solicitor and gave instructions to do that which was required to achieve the desired end result. There is nothing in the evidence to support any contrary conclusion or any express limitation on his overall responsibility, save that it must, as a matter of common sense, have been appreciated that he would have to engage the services of an appropriate expert to attend to survey and other technical planning requirements. The learned magistrate did not really dilate upon this aspect, other than to conclude that, when the contract was signed, it was not clearly explained to the defendant precisely what net sum he stood to receive, after deduction of proper expenses.

63. However, a consideration of the evidence indicates that, so far as the plaintiffs and defendant were concerned, they simply went to O'Brien on the basis that he would attend to all necessary matters, given that he would obviously need to secure other expert services. He prepared the contract and it was left to him to set all necessary wheels in motion and attend to the ultimate settlement and conveyancing details. There is no arguable suggestion of any separate contract on the part of the plaintiffs and/or the defendant with Hennig to the exoneration of O'Brien, nor does the evidence support a conclusion that it was expressly agreed that Hennig would have discrete legal responsibility (to the exoneration of O'Brien) for obtaining the consents required by the agreement. True it is that, in fact, O'Brien delegated that task to him, but this cannot absolve O'Brien for all responsibility in that regard. The evidence indicates that the parties looked to him as the person primarily responsible to them for overall implementation of the agreed transaction and that he, in fact, undertook that task.

64. That is not to say that O'Brien was not entitled and expected to delegate appropriate technical tasks to Hennig but, at the least, the nature of his retainer was such that his obligation was to oversee and orchestrate the total transaction.

65. When O'Brien received first Hennig's letter and then the copy of that written by the Planning Officer two things must have become patently apparent to him, had he seriously applied his mind to the correspondence, namely:-
    (1) That what was being said was seriously in conflict
    with O'Callaghan's original advice and, equally
    importantly,
    (2) That the contents of the Planning Officer's letter
    and, for that matter, even Hennig's letter, were highly
    indicative, on the face of them, that the initial
    application had not been prosecuted on the basis envisaged
    by O'Callaghan - despite the fact that the instructions to
    Hennig were obviously intended to relate back to the
    original advice given.

66. It seems to me that, in such circumstances, it was clearly encumbent upon O'Brien to either challenge Hennig and seek an explanation as to why he had not pursued the recommended course, or, at the very least, to demand an explanation as to why, despite the original advice, an impasse had developed. In point of fact when, in an around about fashion, O'Brien eventually did so in his letter to Hennig of 1 November 1990, Hennig at once appreciated his default and satisfactorily proceeded to rectify it.

67. It remains quite inexplicable why an experienced solicitor did not raise the issue in a timely manner, instead of becoming pre-occupied with attempting to persuade the parties to another course which none of them ever contemplated or desired.

68. This is not merely wisdom borne of hindsight. O'Brien simply overlooked the obvious in a manner which clearly constituted negligence on his part.

69. The learned magistrate was well justified in concluding, as he did, that O'Brien had breached his duty to his clients; and that Hennig had also breached his duty by failing to take obvious steps, at the time, to rectify his initial default. It is not to be forgotten that the learned magistrate rejected Hennig's assertion that he was, at all material times, well aware of the Part 3 aspect of the matter. In consequence Hennig's letter of 17 September 1990 was both incorrect and misleading; and triggered off the sorry sequence of events which followed.

70. The learned magistrate was, properly, highly critical of O'Brien for permitting an obvious virtual double conflict of interest situation to continue as at 16 October 1990, when the power of attorney was signed and advice was tendered to Loder that it was open to the defendant to terminate the contract.

71. For present purposes the only real relevance of that conflict of interest situation is that it, perhaps to some extent, serves to explain how O'Brien was less acute as to his duty to question the situation in the interest of the defendant; and was quick to advise Loder, quite incorrectly, that it was open to him to terminate the agreement.

72. That advice was bad and it would readily have been apparent to O'Brien that such was the situation had he reacted promptly and appropriately to Hennig's letter and the letter written by the Planning Officer. The advice was also a clear breach of duty to the defendant, as the learned magistrate correctly assessed, because it was given as a consequence of an uncritical acceptance of what had been communicated to O'Brien when the situation cried aloud for challenge.

73. Any assault on the propriety of the finding of negligence against both third parties in relation to the legally unjustified repudiation of the agreement by Loder must summarily be rejected.

74. Mr Morcombe QC and Mr Meyer next both sought to argue that, even if that be so, then the assessment of damages which had been made by the learned magistrate (and as to which the third parties had been held liable to indemnify the defendant) was patently insupportable.

75. That submission focused on the concept of causation.

76. The judgment entered by the learned magistrate reflected his conclusion that the loss sustained by the plaintiffs, as a consequence of the refusal of Loder to perform the contract, continued on up to judgment; and that the third parties remained liable for all of such loss.

77. It was argued before me that this reasoning was fallacious. On behalf of O'Brien it was contended that, assuming that the third parties had been negligent, then the chain of causation of loss was automatically broken at the point when, on 27 March 1991 (the so-called "Easter meeting"), O'Brien told the parties that it was then possible to proceed with the transaction, because consent had been given and he ceased, by his own decision, to act for any party - whereupon the plaintiffs and defendant presumably each, later, sought independent legal advice.

78. I here pause to comment that there is no evidence to establish precisely when they did seek other legal advice, or what was the nature of any advice given.

79. In the course of the argument, by reference to the evidence at page 449 of the transcript, Mr Morcombe QC urged upon me that, at the Easter meeting, O'Brien told the parties that they should proceed to complete the agreed transaction, consent having been given. Such a suggestion cannot be sustained. A careful perusal of the transcript at pages 301 and 451 immediately reveals that Loder expressly rejected the proposition that O'Brien advised him that the defendant was contractually obliged to proceed, consequent upon consent having issued. He in fact insisted that O'Brien merely stated that the sale could proceed - a fundamentally different proposition.

80. For his part, Mr Meyer argued on behalf of Hennig that, assuming that his client was guilty of negligence in relation to the initial handling of the task entrusted to him, then -
    - he subsequently repaired his breach of duty by no later
    than 7 February 1991, when planning consent actually
    issued; and
    - in any event, he was not involved in the giving, by
    Loder, of the notice to terminate and/or the giving of the
    advice which led to the actual delivery of the notice of
    termination. Nor was he involved in what O'Brien told the
    parties at the Easter meeting.

81. Thus, it was submitted, not only was Hennig's degree of negligence significantly less than that of O'Brien, but also the chain of causation flowing from it ceased by 7 February 1991, or very shortly thereafter, when the plaintiffs and the defendant were made aware of the issue of the consent.

82. To my mind all of the foregoing reasoning is simplistic in the extreme and does not reflect the practical or legal realities of the situation. Indeed, in relation to O'Brien, it is a somewhat startling proposition that a solicitor in breach of his duty of care can break the chain of causation of damage, to his own advantage, merely by declining to act further for his client.

83. It seems to me that, in this regard, the logical conceptual commencement point is the discussion to be found in March v E and M H Stramare Pty Ltd and Anor (1991) 171 CLR 506. As the majority of the Court there held, causation is a question of fact, to be answered by reference to common sense and experience. It is one into which considerations of policy and value judgments necessarily enter. The so-called "but for" or causa sine qua non test is not a definitive test of causation - although I do not take the majority to have totally excluded such a test as one proper aspect of consideration. (See, for example, Deane J at p522.)

84. Approaching the matter in that way, it appears to me that plain common sense indicates not only that the plaintiffs' loss stemmed directly from the combined negligence of Hennig and O'Brien, but also that nothing was shown subsequently to have occurred to break that chain of causation.

85. Whilst it is true that the onus remains on the defendant throughout to prove causation as against the third parties, once primary causation has been shown and it appears, prima facie, to be continuing, then the evidentiary onus necessarily shifts to those positively asserting any novus actus interveniens to lead or point to evidence to establish the affirmative proposition contended for.

86. In the instant case the third parties have not been able to discharge that onus. Indeed, as I have pointed out, it is not even known precisely when other legal advice was sought and what advice was given. All that occurred was that the defendant, having originally purported to rescind pursuant to O'Brien's advice, simply maintained that stance - there being no evidence even that he was ever given positive advice by anyone that, consent having issued, he should (or was bound to) complete.

87. True it is that, for collateral reasons related to the perceived adequacy of consideration, Loder was more than happy to receive and act on O'Brien's initial negligent advice; and thereafter to maintain his position, having done so. However, he could well, in all of the circumstances, be pardoned for viewing O'Brien's later statement that the transaction "could" proceed as being no more than what, in reality, it was - a mere suggestion to enable the parties to settle their differences, against the background of the negotiations which had already taken place.

88. To the extent that the appeals place in question the issue of causation they necessarily fail.

89. It seems to me that, in making their submissions in this matter, counsel for the third parties, to some extent, blurred the two quite separate concepts of causation and mitigation - given that, in some situations, these may merge into one another. In reality their arguments actually amounted to submissions that, because, when the consent finally issued, the defendant (by Loder as his attorney) failed to avail himself of the opportunity of completing the transaction, then the loss which thereafter followed was essentially of his own making, or that he had, at best, acted unreasonably.

90. It is trite to say that the third party proceedings in this case are no more and no less than an action, separate and apart from the proceedings between the plaintiff and the defendant whereby the defendant, in the role of a plaintiff, sues the third parties for damages by way of indemnity to an extent co-extensive with any judgment given in favour of the plaintiffs in the primary action.

91. That being so questions of mitigation may be raised by the third parties in exactly the same manner as if the defendant had initiated a totally new and independent cause against them, prosecuted as a quite discrete action, heard at some other time. (See Scrutton LJ in Barclay's Bank v Tom (1923) 1 KB 221 at 225, citing Cozens-Hardy LJ in McCheane v Gyles (1902) 1 Ch 287 at 301.)

92. As has been pointed out by Sir John Donaldson MR in Sotiros Shipping Inc and Aeco Maritime S.A. v Samceiet Solholt (1983) 1 Lloyd's Rep 605 (citing British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (1912) AC 673 at 689) and also Anderson J in Falko v James McEwan and Co Pty Ltd (1977) VR 447, there is an obligation on a plaintiff to take all reasonable steps to mitigate his or her loss. This is not, however, a positive duty to take steps to minimise loss. In Jamel v Moolla Dawood, Sons and Co (1916) AC 175 at 179 Lord Wrenbury commented:-
    "It is undoubted law that a plaintiff who sues for damages
    owes the duty of taking all reasonable steps to mitigate
    the loss consequent upon the breach and cannot claim as
    damages any sum which is due to his own neglect."

93. Whether a loss is avoidable by reasonable action on the part of a plaintiff is a question of fact and not law (Payzu Ltd v Saunders (1919) 2 KB
581). Although many of the reported decisions concern themselves with claims arising from contract, there is no conceptual difference in approach in the case of actions based on tort.

94. It was the situation that the defendant had an unfettered right to act, or refrain from acting, on the negligent advice tendered to him. No question of mitigation did or could arise against him at that stage. The loss that flowed (in the sense of damage thereby occasioned to the plaintiffs and recoverable from the defendant) was directly attributable to the breach - save to the extent that, thereafter, it was avoidable by some reasonable further action on the defendant's part; and was recoverable against the third parties. (Cf the reasoning of Sir John Donaldson MR in the Solholt Case p608.) It is nothing to the point that any further reasonable action might, in effect, have reversed the defendant's rescission of the agreement.

95. It is of importance, in the instant case, to note that, at all material times, the plaintiffs remained ready willing and anxious to carry the agreement into effect, as evidenced by the relief sought and obtained in this action. This is so notwithstanding unsuccessful attempts by Loder to sell the whole of the subject property for a higher price from as early as 18 March 1991. Prima facie, then, it might be argued that the defendant acted unreasonably in the circumstances, by not acceding to the plaintiffs' requests to carry the sale into effect, when notified of the issue of the planning consent.

96. Mr Smith of counsel for the defendant sought to counter such a proposition. He pointed out that due allowance needed to be made for the fact that the defendant's mental and physical health appeared to have been in a state of steady decline at the time and that the defendant was, at the best of times, of limited intellect. He, in effect, cautioned against resort to undue wisdom after the event, bearing in mind the legal complications with which the defendant was confronted - at a point in time when legal debates were ensuing as to whether the agreement had lawfully been terminated and/or the plaintiffs had acted in a manner constituting an acceptance of that situation; and whether or not the contract was unconscionable and ought, in any event, to be set aside, as such. It was said that it was not unreasonable for him to decline to proceed with the original sale whilst these issues remained unresolved.

97. As I see the situation, whilst such aspects may serve to explain the conduct of the defendant and/or Loder, they do not automatically resolve the question of whether the defendant acted reasonably, when the situation is viewed objectively. On the other hand, it does not appear that the defendant was ever advised of his duty to mitigate, least of all by O'Brien - who went no further than to say, at the Easter meeting, that he "could" proceed with the agreement, consent having been forthcoming.

98. Indeed it can even strongly be argued that the advice tendered by O'Brien at the Easter meeting was also negligent, because it failed to address any potential issue of a need to mitigate because of his own potential liability for professional negligence. It ill behoves him, at this point, to assert unreasonableness when, having precipitated the plaintiffs' loss by his own negligent advice to the defendant, he compounded that situation by failing to explain the defendant's potential responsibility and merely indicating that the defendant "could" proceed with the original arrangement, if he chose to do so. It is not suggested that anyone else ever pointed out the potential issue of mitigation to the defendant, albeit that the situation was no doubt overshadowed by pending litigation based on alleged unconscionability and other legal issues.

99. This matter is by no means free from difficulty. However, in the end, I am of opinion that the answer is to be found in the lastmentioned feature, particularly having regard to the defendant's obvious infirmities of intellect and the situation into which O'Brien's actions had precipitated him. Whilst Loder was certainly acting as his attorney in the strict legal sense, there is no doubt that, to use the vernacular, the defendant personally seems to have been "calling the ultimate shots". Moreover, the question of reasonableness has to be determined in the context of a professional negligence situation in which the issues had become quite blurred by continuing acts of negligence on the part of O'Brien who was, at least by the Easter meeting, reaping the practical whirlwind of the conflict of interest situation in which he had placed himself. It was a position of extreme discomfort for O'Brien who, no doubt, was loathe to say anything which might infer or concede negligence on his own part and a consequential need for the defendant to consider mitigation.

100. I have therefore come to the conclusion that the conduct of the defendant in not completing the agreement after consent eventually issued did not constitute a failure to mitigate; and that, as I have said, it ill behoves O'Brien, in particular, to assert to the contrary.

101. In so concluding I bear well in mind the approach in Nesseler and Anor v Lennon and Woosnam (Court of Appeal (Qld), 14 May 1993, unreported). That also was a professional negligence case in which, acting on negligent advice of a solicitor, vendors of a business had unlawfully purported to rescind a contract of sale. As here, the purchasers, had not accepted the rescission and were striving to obtain specific performance of the contract.

102. The Full Court there, inter alia, commented:-
    "Since the purchaser had not at the time the negotiations
    were opened accepted the respondents' purported rescission
    but was, on the contrary, seeking to enforce the
    contracts, it would have been open to the respondents to
    withdraw their purported rescission and let the purchaser
    have the possession which its proceedings claimed: see
Frost v Knight (1872) LR 7 Ex 111 at 112."

103. In the event the Court held that, when a stage was ultimately reached at which the vendors "became persuaded (by appropriate independent legal advice) that their purported rescission ... was invalid", they had failed to mitigate in manner adverted to in Frost v Knight; so that their damages were limited to loss occasioned to date of permission, interest and appropriate legal costs for which they were liable or had themselves incurred.

104. However, the critical difference between the Queensland case and the matter now before me is that, not only was it never established on the evidence that the defendant was or ought to have been persuaded that his purported termination was patently invalid, but also, on the contrary, the further advice tendered to him distracted his attention from the sepcfic issue by merely focusing on the suggestion that, if he felt so inclined, he could settle the matter by proceeding on the agreed basis. Moreover at that point his clear understanding was that, in law, the bargain had, in any event, been unconscionable. No legal advice was ever apparently tendered to any other effect. On the contrary the action went to trial with that aspect remaining a very live issue. The basic rationale in Nesseler and Anor v Lennon and Woosnam was simply inapplicable on the facts.

105. That being so the appeals as to quantum of indemnity must also be dismissed. I will, as arranged, hear counsel concerning the outstanding issue of costs.

106. For the sake of completeness I record that no substantial argument was advanced as to the apportionment of liability made by the learned magistrate in relation to the third parties. It seems to me that the conclusion to which he came in that regard was fairly open to him and I seen no reason to interfere with it.