Vaughan v Legal Practice Board - [2004] VSC 89

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 4569 of 2002

GERALD VAUGHAN AND PATRICIA RALPH	Plaintiffs
v
THE LEGAL PRACTICE BOARD AND OTHERS	Defendants

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JUDGE:	OSBORN J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	4 MARCH 2004
DATE OF JUDGMENT:	25 MARCH 2004
CASE MAY BE CITED AS:	VAUGHAN v THE LEGAL PRACTICE BOARD
MEDIUM NEUTRAL CITATION:	[2004] VSC 89

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Application for summary dismissal - Appeal against Master's order – Defalcations – Trust Account Audit - Duty of care – Misrepresentation by silence – Auditor acting in trade or commerce – Claim in negligence – Negligent misstatement.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	L. Glick SC with R. Randall	Strongman & Crouch
For the Third Defendant	J. Dixon	Moray & Agnew

HIS HONOUR:

The plaintiffs in this matter seek relief with respect to moneys lost by them as a result of defalcations in 2001 by the secondnamed defendant with respect to moneys held by her as their solicitor in her trust account.

The application before me is an appeal against the order of Master Wheeler made on 9 December 2003 striking out the amended statement of claim dated 14 July 2003 insofar as it relates to the thirdnamed defendant and dismissing the plaintiffs' claim against him pursuant to r.23.01 of the Rules of the Supreme Court. Such an appeal is by way of rehearing.

It was conceded before the Master that the amended statement of claim dated 14 July 2003 was deficient and argument both before him and in turn before me has proceeded by reference to a proposed further amended statement of claim being Exhibit CIF2 to the affidavit of Cameron Ian Forrester sworn 16 October 2003.

By that statement of claim it is in substance alleged:

(a)the thirdnamed defendant was formerly an ‘auditor’ as that expression was used in the Legal Profession Practice Act 1958[1], and has since been an ‘approved auditor’ within the meaning of s.3 of the Legal Practice Act 1996.
[1]See Jackson v Renowden [1965] VR 314
(b)at all material times the solicitor was required to have her trust account audited annually and to lodge with the relevant authority a report of that annual audit.
(c)the solicitor was required to apply annually for a renewal of her practising certificate and "subject to certain provisions" the regulatory authority ("the RPA") was required to refuse to issue a practising certificate to the solicitor authorising receipt of trust moneys by her if:
(i)the solicitor defendant failed to lodge an audit report as required; or
(ii)any audit revealed a deficiency in the solicitor's trust account had not been rectified.

(d)the thirdnamed defendant was retained to audit the solicitor's trust account from 1992 onwards, and from 1993 up until 31 October 2000 ("the period of audits") reported that he was of the opinion the solicitor had, during the period of each annual audit, complied with the requirements of the relevant legislation.
(e)in each year during the period of audits the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] VSC 89
Decision Date: 25 March 2004

CaseChat Overview and Summary

The case of Vaughan v Legal Practice Board involved an application by the respondent to dismiss the appellant's claim, which sought damages for alleged negligent misstatements made by the respondent. The appellant, a lawyer, claimed that the respondent, Legal Practice Board, failed to exercise the requisite duty of care when conducting an audit of his trust account. The case was heard in the Federal Court of Australia.

The legal issues before the court were whether the respondent owed a duty of care to the appellant, whether the respondent's silence constituted a misrepresentation, and whether the auditor acted in trade or commerce. The court also needed to determine if the respondent's actions constituted negligent misstatement.

The court held that the respondent owed a duty of care to the appellant, as the trust account audit was conducted in the course of the respondent's business. The court found that the respondent's silence during the audit could be considered a misrepresentation by silence, as the respondent had a duty to provide accurate information. Furthermore, the court determined that the respondent acted in trade or commerce, and therefore, the claim in negligence was valid. The court dismissed the appeal and allowed the appellant's claim to proceed.

The court ordered that the application for summary dismissal be dismissed and that the appellant's claim for damages due to negligent misstatement proceed to trial. The court found that the respondent had a duty of care towards the appellant during the trust account audit and that the respondent's silence could be considered a misrepresentation. The court also held that the respondent acted in trade or commerce, which allowed the claim in negligence to proceed.

Orders