JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: TOWNSEND & ANOR -v- ROUSSETY & CO (WA) PTY LTD & ANOR [2007] WASCA 40
CORAM: WHEELER JA
McLURE JA
BUSS JA
HEARD: 18 APRIL & 10 AUGUST 2006
DELIVERED : 20 FEBRUARY 2007
FILE NO/S: FUL 8 of 2005
BETWEEN: ELLEN DALE TOWNSEND
First Appellant
CAROLINE ADRIANA MORRIS
Second AppellantAND
ROUSSETY & CO (WA) PTY LTD (ACN 056 022 130)
First RespondentSTANLEY JOHN PILKADARIS
Second Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :LE MIERE J
Citation :TOWNSEND & ORS -v- COLLOVA & ORS [2005] WASC 4
File No :CIV 1880 of 2001
Catchwords:
Contract - Offer to acquire shares in company - Offer and acceptance subject to parties entering into formal agreement on terms and conditions to be mutually agreed - Whether offer and acceptance was a binding contract
Contract - Contract of retainer inferred from conduct - Terms of the contract
Misleading or deceptive conduct - Sections 52 and 82 of the Trade Practices Act 1974 (Cth) - Sections 10 and 79 of the Fair Trading Act 1987 (WA) - Characterisation of misleading or deceptive conduct - Respondents made statements which were "halftruths" - Obligation to disclose whole truth - Misleading or deceptive conduct was the nondisclosure of the whole truth - Causation - Whether the misleading or deceptive conduct was a cause of the appellants' loss - The effect of the misleading or deceptive conduct may be inferred - Whether the appellants' loss was attributable to a supervening cause which wholly negatived the misleading or deceptive conduct
Negligence - Professional negligence - Whether concurrent duties in contract and tort - Duty in tort may be limited by contract of retainer - Duty of care may still be owed in the absence of contract of retainer - Whether a duty of care owed - Whether duty of care breached
Equity - Whether fiduciary duties owed by accountant in relation to matters not within the contract of retainer
Legislation:
Trade Practices Act 1974 (Cth), s 52, s 75B, s 82, s 87
Fair Trading Act 1987 (WA), s 10, s 77, s 79
Result:
Appeal allowed
Category: A
Representation:
Counsel:
First Appellant : Mr G R Hancy
Second Appellant : Mr G R Hancy
First Respondent : Ms A M I Schoombee
Second Respondent : Ms A M I Schoombee
Solicitors:
First Appellant : Arthur Metaxas & Co
Second Appellant : Arthur Metaxas & Co
First Respondent : Allens Arthur Robinson
Second Respondent : Allens Arthur Robinson
Case(s) referred to in judgment(s):
Abigroup Contractors Pty Ltd v ABB Service Pty Ltd [2004] NSWCA 181
Astley v Austrust Ltd (1999) 197 CLR 1
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Keep reading for free
Create a free CaseChat account to read Townsend v Roussety & Co (WA) Pty Ltd and more:
- Read every judgment in full
- Ask AI and get answers linked to paragraphs
- See how each paragraph was cited in later cases
- Download judgments as PDF or Word
One click creates your free account or signs you in.
By continuing you agree to the Terms and Privacy Policy.
- Case
- [2007] WASCA 40
- Decision Date
CaseChat Overview and Summary
The primary legal issues before the court were whether a contract of retainer existed between the appellants and the respondents, the terms of any such contract, and whether the respondents had breached their duties under the contract. The court also had to consider whether the respondents had engaged in misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (WA), and whether such conduct was a cause of the appellants' loss. Furthermore, the court had to determine whether the respondents owed a duty of care to the appellants in tort and whether any such duty was breached.
The court held that a contract of retainer was implied from the conduct of the parties, as the respondents had accepted responsibility for preparing the loan documents and both parties had relied on the respondents for professional advice. The court found that the respondents had breached their contractual obligations by failing to warn the appellants of the significant risks and inadequacies in the loan transaction. The court also found that the respondents had engaged in misleading or deceptive conduct by providing "half-truths" without disclosing the full extent of the risks involved. This conduct was held to be a cause of the appellants' loss. Additionally, the court determined that the respondents owed a duty of care to the appellants in tort, which was breached, and that the respondents also breached fiduciary duties by not acting in the best interests of the appellants.
The court ordered the respondents to pay damages to the appellants for the losses suffered as a result of the breach of contract, misleading or deceptive conduct, and breach of duty of care and fiduciary duties. The exact amount of damages was to be determined at a subsequent hearing.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
The existence of a contract for the provision of professional services, and the terms of the contract, may be implied or inferred. As McHugh JA (with whom Hope and Mahoney JJA agreed) said in Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110, at 11,117:"It is often difficult to fit a commercial arrangement into the common lawyers' analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of 'offer', 'acceptance', 'consideration' and 'intention to create a legal relationship' which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship. Compare PS Atiyah, 'Contracts, Promises and the Law of Obligations', Law Quarterly Review, vol 94, 1978, p 194. A bilateral contract of this type exists independently of and indeed precedes what the parties do. Consequently, it is an error 'to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed' : Howard, 'Contract, Reliance and Business Transactions' [1987] Journal of Business Law, p 127. Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523. The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract: cf Baltimore and Ohio RR Co v US 261 US 592 (1923); Fincke v US 675 F2d 289 (1982). Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances.…"Those observations were applied by the Court of Appeal of New South Wales in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [74] ‑ [77]. Also see Damevski v Giudice (2003) 133 FCR 438 at [82] ‑ [88]; Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 at 82 ‑ 83. In Pegrum v Fatharly (1996) 14 WAR 92, the salient facts were these. A man called Wilkins and his group of companies wished to borrow money from the appellants. The loan and security documents would ordinarily have been prepared by the lender's solicitors, at the cost of the borrower. Wilkins suggested to one of the appellants that the respondent, who was retained as solicitor for the Wilkins group, prepare the documents. The male appellant agreed. At all material times it was understood that the respondent would be, and he was, the sole solicitor involved in the transaction. Both parties met with the respondent and gave him information to enable him to prepare the documents. At the meeting the respondent sought and obtained the male appellant's confirmation that it was in order for him to prepare the documents. The respondent prepared the documents which imposed on the borrower (Wilkins) the obligation to pay the lenders' (the appellants') costs of and incidental to the instructions for and the preparation of the documents. At all material times, the respondent knew that Wilkins and his group of companies were a bad risk and that the securities given by them were inadequate to secure the loan. He did not warn the appellants of the existence of the risk or the inadequacy of the security. Wilkins defaulted in the repayment of the loan, the securities were inadequate, and little of the loan was recovered. The appellants sued the respondent for damages for professional negligence in failing to give proper advice and also for breach of fiduciary duty. The trial Judge dismissed the claim, holding that the appellants had not proved the respondent had acted for them in the transaction or that he owed them any relevant duties. The Full Court of the Supreme Court of Western Australia allowed an appeal by the male appellant. It was held that, in all the circumstances, the proper inference was that the respondent had tacitly agreed to act as the male appellant's solicitor and owed him the usual professional duties. Anderson J (with whom Kennedy J agreed) said, at 102:"When both parties to a transaction consult the same solicitor and together give him the information needed to prepare the documents in which their respective rights and obligations are to be set out and the solicitor accepts responsibility to prepare the documents without any indication that he cannot fully discharge his professional duties to them both there is a strong bias towards finding that the solicitor tacitly agrees to act for both parties and to undertake the usual professional responsibilities to them both: see Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 esp at 396. In the absence of a clear indication by the solicitor that the solicitor does not accept one of the parties as his client it is natural in such a case to assume both are relying on him for professional advice and assistance. This follows from the mere fact that both have consulted him. There may be other circumstances which show that there is no reliance by one or other of the parties on the solicitor, but, if not, reliance should be inferred as a fact. And when a solicitor accepts responsibility to do professional work requiring special knowledge and skill and there is in fact a reliance on him to apply his expert knowledge and skill in the performance of that work, there exist 'the elements which lie at the heart of the ordinary relationship between a solicitor and his client …': see Hawkins v Clayton (1988) 164 CLR 539 at 578, per Deane J. This is not a special rule applicable only to solicitors, I do not think. For an example of its application to a statutory auditor see Shire of Frankston & Hastings v Cohen (1960) 102 CLR 607 at 619, per Fullagar J. This does not mean a solicitor whose services are sought by both parties is bound to accept that he is to serve both parties. He can refuse to do so and elect to act for one party only. This requires a very clear statement by the solicitor that this is to be his position. It has even been held that he is duty bound in such a case to positively recommend that the other party get another solicitor and take independent advice before entering into the transaction, and in the event that recommendation is not followed, to give him proper advice as to the risks in signing the documents: see Irvine v Shaw [ 1992] ANZ Conv R 83."Also see Meerkin & Apel v Rossett Pty Ltd [1998] 4 VR 54, per Charles JA at 62 ‑ 66 (with whom Callaway and Batt JJA agreed).