Benson v MacLachlan t/as Sterling Conveyancers

COUNSEL : A: D Davies SC / R D Marshall R: J Whittle SC / J Gooley SOLICITORS : A: John Walsh & Partners R: Maccallum Lawyers CATCHWORDS : Torts - Conveyancing - contract for the sale of land - liability under Corporations Law where an unincorporated company purports to enter a contract - whether conveyancer failed to advise on potential liability - whether breach of duty - appeal dismissed. s 183(7) Corporations Law LEGISLATION CITED : S 66W Conveyancing Act Conveyancers' Licensing Act 1995 CASES CITED: Philips v Wm Whiteley Ltd [1938] 1 All ER 566 DECISION : Appeal dismissed with costs.

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

Wednesday, 15 August 2001 GARY STEVEN BENSON v MORAG MACLACHLAN t/as STERLING CONVEYANCERS FACTS The respondent acted as conveyancer for the appellant and A in the purchase of a block of land which they had agreed to purchase on behalf of C. In its final form, the contract for the sale of land described the purchasers as the appellant and A "on behalf of Pacific Palms Pty Limited, a company yet to be incorporated." Contracts were exchanged on 6 June 1997. The purchase price was $2,250,000 with a deposit of $112,500.

C was unable to register a company called Pacific Palms Pty Limited and instead registered Fyndemo Pty Limited, which was agreed to be the corporate purchaser under the contract.

On 30 December 1997 the vendors terminated the contract as a consequence of the purchasers' default. The property was resold for $2,000,000. The vendors successfully sued Fyndemo Pty Limited, C, the appellant and A. The trial Judge dismissed a cross claim by the appellant against the respondent conveyancer and found the appellant liable to pay damages under Corporations Law, s183. It is from that decision that this appeal was brought. The substance of the appellant's claim was that the respondent failed to explain or advise him on his liability under s183, or under the general law.

HELD per Meagher JA (Handley JA & Heydon JA agreeing): (i) The appellant knew that (a) a company would be involved as purchaser and (b) that he and A were involved as nominal purchasers. He must have known that his personal liability was not purely fictive. Further, the trial Judge accepted that an employee of the respondent had explained to the appellant his liability in the event of default.

(ii) The appellant ought not be allowed to rely on the fact that amendments were made to the contract between signature and exchange as the matter was not raised in the pleadings at first instance, nor in the notice of appeal.

(iii) Per Meagher JA (Heydon JA not deciding): A conveyancer in a conveyancing matter owes the same duty of care to his clients as a solicitor would have if handling the same matter. Per Handley JA: Licensed conveyancers are capable of doing conveyancing work which does not require the fuller legal knowledge which solicitors are expected to possess. They should not be expected to provide the same service as solicitors, and they do not have the same duty of care.

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

Wednesday, 15 August 2001 GARY STEVEN BENSON v MORAG MACLACHLAN t/as STERLING CONVEYANCERS JUDGMENT

1 MEAGHER JA: This appeal concerns the sale of a block of land known as 383 Bobbin Head Road, Turramurra. Turramurra is a suburb of Sydney. A certain Mr Martin Comer, who apparently was a real estate developer, was minded to purchase it. Why he did not go ahead and do so, and in his own name, one does not know. He persuaded two of his friends, the appellant Mr Benson and a woman called Mrs Aeckerle, to act as his puppets in purchasing the land. 2 He, accordingly, took Mr Benson and Mrs Aeckerle to the conveyancers who were acting for him, the respondent Miss (or Mrs) Morag Maclachlan, trading as Sterling Conveyancers, for the purpose of signing the purchasers' counterpart of a contract of sale. They did so. This took place on 30 May 1997. At this stage the contract's description of the purchaser was: "Gary Steven Benson of 74/110 Sussex Street Sydney 2000 and Irene Aeckerle of 44 Ballast Point Road Birchgrove 2041". 3 The purchase price was $2,250,000.00. The deposit was 5%, ie $112,500. Mr Benson gave his personal cheque for this amount to the respondent on the same day. 4 Mr Comer's adviser in the transaction was the respondent. However, on 30 May, despite an arrangement to see Mr Comer and his friends in the morning, she was available at the arranged time, but they did not come then; and when they turned up in the afternoon she was busy, so that they were seen by one of her employees, a Miss (or Mrs) Lewis. There are long, and rather conflicting statements by Miss Lewis and Mr Benson about what was said at this meeting. 5 Contracts were exchanged on 6 June 1997, about a week later. By that date two alterations had been made to the contracts. One was in the description of the purchasers, where the following words were added to those already printed: "on behalf of Pacific Palms Pty Limited, a company yet to be incorporated". The second was to include a new clause (Clause 39) which provided that the purchasers would be liable for 10% of the purchase price in the event of default. (It will be remembered that the deposit had previously been 5%.) Mr Benson was not consulted about either of these alterations; nor was Mrs Aeckerle. 6 On 5 June 1997 Mr Comer executed a form of guarantee and indemnity in favour of the vendors, in effect guaranteeing the purchaser's performance of the contract. 7 Mr Comer was unable to register a company called "Pacific Palms Pty Limited", and eventually registered one called Fyndemo Pty Limited, which all parties agreed was the corporate purchaser under the contract. 8 The appellant Mr Benson swore that neither he nor his friend Mrs Aeckerle at any time had any intention to purchase the land personally. They were mere catspaws for Mr Comer. It was probably for this reason that Mr Benson procured Mr Comer to give him a written indemnity. 9 On 9 September 1997 the respondent tendered to the vendors' solicitor for execution by them of a Memorandum of Transfer providing for the transfer of the property to Fyndemo Pty Ltd. 10 On 8 December 1997 the vendors issued a notice to complete the contract, and on 30 December they terminated it as a consequence of the purchasers' default. They resold the property on 15 November 1998 for $2,000,000.00. 11 Then this litigation began. The vendors, Mr & Mrs Pearson, sued the purchaser, Fyndemo Pty Limited; Mr Comer, the impresario of the transaction; and the apparent original purchasers, Mr Benson and Mrs Aeckerle. 12 His Honour found that the Pearsons were entitled to orders against all these defendants. Fyndemo Pty Ltd, which is now in liquidation, took no part in the proceedings. His Honour gave a verdict against it for $380,356.00 made up as follows: Balance of deposit $112,500.00 Damages for resale at reduced price $ 25,000.00 Interest on purchase price up until resale $198,516.00 Interest from resale to date of hearing $ 44,340.00

He granted a verdict against Mr Comer for the same amount, based on the latter's guarantee. He granted a verdict against Mr Benson for $127,545.00 under the discretionary power vested in him by s 183(7) of the Corporations Law as it stood at the time. Mrs Aeckerle had died by the time the matter came to trial; we were told that her estate is being administered as an insolvent estate; neither she nor her estate were represented on the appeal. In a sense, none of the foregoing matters, except to provide a factual matrix for the present appeal. There is no challenge to any of his Honour's verdicts which I have recited. 13 But Patten DCJ also decided a cross claim by Mr Benson against the respondent conveyancer. His Honour dismissed that cross claim. The substance of that cross claim, which has been resuscitated on appeal, is that Miss Lewis, Mrs Maclachlan's employee, did not explain and advise Mr Benson about his liability under s 183 of the Corporations Law, or under the general law. As I have said, there are two different accounts of what Miss Lewis said to Mr Benson, hers and his. His Honour preferred hers to his (except on one matter). There is no need to set out the two accounts. She also stated that she handed him a Certificate under s 66 W of the Conveyancing Act certifying, inter alia, that she had explained to him "the effect of the contract for the purchase of the property". His Honour must have accepted that Certificate as accurate. 14 Section 183(7) of the Corporation Law, as it stood at the date of the contract, and in so far as it is relevant, reads as follows: "Promoter's liability where contract ratified Where: (a) a non existent company purports to enter into a contract; (b) the company is formed and ratifies the contract as provided by subsection (2); (c) the contract is discharged by a breach of the contract constituted by a refusal or failure of the company to perform all or any of its obligations under the contract; and (d) the other party or any one or more of the other parties to the contract brings or bring proceedings against the company for damages for breach of the contract; the Court in which the proceedings are brought may, subject to subsection (9), if it thinks it just and equitable to do so, order the person or any one or more of the persons who purported to execute the contract on behalf of the company, to pay to the person or persons by whom the proceedings are brought, the whole or a specified portion of any damages that the company has been or is found liable to pay to the person or persons by whom the proceedings are brought." 15 This was the section under which his Honour acted in awarding damages against Mr Benson. As Handley JA pointed out during argument, Mr Benson's position could not be worse off under the statute than it would have been at Common Law but might be better. In any event, Mr Benson knew, without anyone telling him, (a) that a company would be involved as purchaser and, (b) that he and Mrs Aeckerle were involved as nominal purchasers. He must surely have known that his personal liability was not purely fictive. He had considerable education; he was a man of some business experience; he was an adult; he could read and write; he had some intelligence. Common sense would dictate that he must have known that personal liability was on the cards. 16 In his written submissions to the Court counsel for Mr Benson made the following submission: "His Honour did not address the question of whether the conveyancer gave proper advice to Mr Benson in his potential exposure in the event of default."

As learned senior counsel submitted in answer: "It can't seriously be suggested that one has to advise someone, whatever their exact training as a chartered accountant, that if you sign a document which is a contract for the sale of land in an unqualified manner you will be potentially liable under the contract for whatever breaches of contract may flow". 17 In any event, Miss Lewis, when being cross-examined by learned counsel for the appellant, said: "I can remember clearly explaining to the clients in the event of default that they would be up for the deposit, okay plus damages, okay".

His Honour expressly believed her. 18 That, I think, sufficiently demonstrates that the appeal must be dismissed. However, there are two further matters which require mention. 19 The first is that, on the hearing of the appeal, learned senior counsel for the appellant sought to rely on the fact that amendments were made to the contract between signatures and exchange, without the appellant's approval as a ground of appeal. The Court indicated that it would not entertain such argument. The matter was not raised in the pleadings at first instance, nor in the notice of appeal. The respondent may have fashioned her case differently if it had been raised. 20 The second is a matter which does not really arise on the issues between the parties. However, since it has featured in every submission, something should be said about it. Mr Moses, the celebrated expert in these matters, stated that in his view a conveyancer in a conveyancing matter owed the same duty of care to his clients as a solicitor would have if handling the same matter. His Honour disagreed; he said the conveyancer had a somewhat lower standard. If it matters, my view is that Mr Moses is right and his Honour is wrong. The statutory provisions which deal with the matter are principally contained in the Conveyancers' Licensing Act 1995. It enables qualified conveyancers, in effect, to do any conveyancing work, not simply easy conveyancing work. This is the pronounced will of the Parliament as the culmination of a long and virulent campaign by conveyancers who asserted that solicitors were not needed in the area of conveyancing. They achieved this objective, they are now placed on an equal standing with solicitors in that area of legal practice, and they ought to have the same liability. 21 The appeal should be dismissed with costs. 22 HANDLEY JA: I have had the benefit of reading in draft form the reasons for judgment of Meagher JA. I agree with the reasons he has given for dismissing the appeal and do not wish to add anything. 23 However I do not agree with his Honour's remarks in paragraph 20 of his reasons which deal with the standard of care to be expected from conveyancers licensed under the Conveyancers Licensing Act 1995. His Honour's remarks on this question were not necessary for disposing of this appeal. 24 Licensed conveyancers are not qualified for admission as legal practitioners and are not entitled to hold themselves out as so qualified. They do not have law degrees and the public know or should know these basic facts. They are capable of doing conveyancing work which does not require the fuller legal knowledge which solicitors are expected to possess. They can and do provide a basic service at a basic cost. They should not be expected either by their clients, or by the courts, to provide a champagne service for what amounts to a beer price. 25 The appellant complains in this appeal that he was not properly advised by Miss Lewis about the liabilities he would incur when he signed a contract as one of the apparent purchasers, on behalf of a company yet to be incorporated, and the effect of s 183(7) of the Corporations Law. These matters did not involve straightforward conveyancing but an alleged failure on the part of Miss Lewis to provide legal advice involving corporations law and the law of principal and agent. A qualified accountant, such as Mr Benson, who wanted legal advice about those matters knew where he could obtain it, and that was not from Sterling Conveyancers. Mr Benson did not even ask Miss Lewis for advice on these matters, which is not at all surprising, but sought to complain that Miss Lewis did not volunteer such advice. 26 It was said in an earlier age that if one were to take a watch to the village blacksmith to be repaired for reward one could not reasonably expect that he would have and be able to exercise the skills of a watchmaker. This principle was applied in Philips v Wm Whiteley Ltd [1938] 1 All ER 566 where the plaintiff sued a jeweller who had pierced her ears. Goddard J said (569): "I do not think that a jeweller holds himself out as a surgeon … If a person wants to ensure that the operation of piercing her ears is going to be carried out with that proportion of skill … that a Fellow of the Royal College of Surgeons would use, she must go to a surgeon. If she goes to a jeweller she must expect that he will carry it out in the way one would expect a jeweller to carry it out". 27 The appeal should be dismissed with costs. 28 HEYDON JA: I agree with the orders proposed by Meagher JA, and with the reasons advanced for them in [1]-[19] of his judgment. However, since the result of the appeal would not be affected by the particular answers propounded by the parties to the question of what duty of care a conveyancer owes, it is not necessary to answer that important question in this appeal.

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