Cheney & Wilson v Duncan

Court of Appeal (NSW)|2001-07-06|Before: Meagher JA, Handley JA, Deane J

CITATION : Cheney & Wilson v Duncan [2001] NSWCA 197 FILE NUMBER(S) : CA 40093/00 HEARING DATE(S) : 29/06/01 JUDGMENT DATE : 6 July 2001

PARTIES : Anthony Arnold Cheney & Peter Neil Wilson v Michael Ronald Duncan JUDGMENT OF : Meagher JA at 1; Handley JA at 2; Ipp AJA at 3

LOWER COURT JURISDICTION : District Court LOWER COURT 1440/99 FILE NUMBER(S) : LOWER COURT O'Reilly DCJ JUDICIAL OFFICER :

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40093/00 DC 1440/99 MEAGHER JA HANDLEY JA IPP AJA

ANTHONY ARNOLD CHENEY & PETER NEIL WILSON v MICHAEL RONALD DUNCAN

Facts: The respondent was injured in a motor vehicle accident on 24 December 1983. His injuries were caused by the negligence of the driver of the other vehicle, D. The respondent retained solicitors in June 1985 to bring a claim against D's insurers, FAI. This lead to FAI's admission of liability and offer to settle the claim for $3,000. Before the claim was finalised the respondent's solicitor transferred his practice to another solicitor, M, who took no material steps to advance the conduct of the respondent's claim.

After engaging the appellants as his new solicitors the respondent brought a claim against D for damages in August 1991, however this was meet by a defence that the action was barred due to the expiration of the limitation period under s 14(1) Limitation Act 1969. These proceedings were discontinued in January 1992 and an action was brought against his former solicitors, M for professional negligence. These proceedings were dismissed both at trial and on appeal.

In early 1997 the appellant urged the respondent to seek further independent legal advice, as a result of this advice the respondent brought an action against the appellant for professional negligence and breach of retainer. This claim was argued by the appellant to have been statute barred also. The appeal arises from the trial judge's dismissal of the appellant's application for summary dismissal.

HELD (i) Per Ipp AJA, Handley JA and Meagher JA agreeing The general rules as to the statute barring of actions for professional negligence are well settled. A cause of action accrues from when it is complete and the plaintiff has suffered measurable damage, in professional negligence cases this generally occurs when the original action becomes statute barred. (Hawkins v Clayton (1988) 164 CLR 539; Wardley Australia Limited v Western Australia (1992) 175 CLR 514; Scarcella v Lettice [2000] NSW CA 289; Pirelli General Cable Works Limited v Oscar Faber & Partners (a firm) [1983] 2 AC 1; Sampson v Zucker (NSW Court of Appeal, unreported, 11 December 1996); Johnson v Phelan (1988) 166 CLR 351; Nikolaou v Papasavas, Phillips & Company (1989) 166 CLR 394;Registrar-General v Cleaver (1996) 41 NSWLR 713; Hetherington v Mirvac Pty Limited (1999) Aust Torts Reports 81-514; Toomey v WALS (1999) NSWSC 560; Wilson v Rigg [2000] NSWSC 16; Di Sante v Camando Nominees Pty Limited [2000] VSC 211; Doundoulakis v Antony Sdrinis & Co [1989] VR 781 discussed.)

(ii) Per Ipp AJA, Handley JA and Meagher JA agreeing The expectation to the general rule espoused by Deane J in Hawkins v Clayton (at 589-590) operates when the very act of negligence that inflicts the injury also has the effect of precluding the commencement of an action for damages. This does not apply to the present case as the wrongful acts which lead to the loss of the respondent's action against D did not conceal from the respondent that he may have an action against the appellants for their negligence in conducting the proceedings against D.

The respondent's attempts to particularise the negligence in order to bring it within the exception outlined by Deane J failed.

Cases Cited: Hawkins v Clayton (1988) 164 CLR 539 Wardley Australia Limited v Western Australia (1992) 175 CLR 514 Scarcella v Lettice [2000] NSW CA 289 Pirelli General Cable Works Limited v Oscar Faber & Partners (a firm) [1983] 2 AC 1 Sampson v Zucker (NSW Court of Appeal, unreported, 11 December 1996) Johnson v Perez (1988) 166 CLR 351 Nikolaou v Papasavas, Phillips & Company (1989) 166 CLR 394 Registrar-General v Cleaver (1996) 41 NSWLR 713 Hetherington v Mirvac Pty Limited (1999) Aust Torts Reports 81-514 Crisp v Blake (1992) Aust Torts Reports 81-158 Toomey v WALS (1999) NSWSC 560; Wilson v Rigg [2000] NSWSC 16 Di Sante v Camando Nominees Pty Limited [2000] VSC 211 Doundoulakis v Antony Sdrinis & Co [1989] VR 781 ORDERS

Appeal upheld
Summary judgment in favour of appellant
Respondent's claim against the appellant dismissed with costs
Respondent to have certificate under the Suitor's Fund Act, if so entitled.

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40093/00 DC 1440/99 MEAGHER JA HANDLEY JA IPP AJA

ANTHONY ARNOLD CHENEY & PETER NEIL WILSON v MICHAEL RONALD DUNCAN

1 MEAGHER JA: I agree with Ipp AJA. 2 HANDLEY JA: I agree with Ipp AJA. 3 IPP AJA:

The respondent's unsuccessful attempts to sue for damages 4 On 24 December 1983 the respondent was standing in a driveway in Boggabilla when a car driven by Mr David Dennison struck and injured him. Dennison's car was insured by a company in the FAI Insurance group ("FAI"). The respondent has sought the aid of various solicitors in an attempt to recover the damages he sustained. Through no apparent fault on his part, what should have been a short and simple process has resulted in more than fifteen years of unsatisfactory litigation. 5 In June 1985 the respondent retained the services of Mr Patrick Dodgson of Dodgson MacKerras & Company, solicitors, to pursue his claim against FAI. An exchange of correspondence ensued between Mr Dodgson and FAI, culminating on 19 March 1986 when FAI wrote to Mr Dodgson advising him that it was "prepared to accept [the respondent's] claim for personal injuries" and asking Mr Dodgson to forward copies of the relevant medical reports to enable FAI to give consideration to an offer of settlement. 6 Mr Dodgson obtained a report from the local hospital and sent it to FAI. Eventually on 3 June 1986 FAI offered to pay $3,000 in general damages "plus reasonable and proven specials, plus [the respondent's] party and party costs". Mr Dodgson did not respond to this letter. 7 In 1988 Mr Dodgson sold his practice to a firm to which I shall refer as "Mendes". Mendes appears to have done nothing material to advance the respondent's case. Eventually, by letter dated 9 March 1990, Mendes informed the respondent that the limitation period had expired and he was statute barred from proceeding with his claim against Dennison. Mendes recommended that the respondent seek independent legal advice. 8 In August 1990 the respondent consulted the appellant, a firm of solicitors at Orange. On 9 April 1991 the appellant issued a statement of claim on behalf of the respondent claiming damages from Dennison. In his defence dated 25 June 1991 Mr Dennison pleaded that the limitation period had expired and the cause of action was barred by s 14 of the Limitation Act 1969. 9 The appellant then sought the advice of a barrister. On 30 October 1991 the barrister provided an opinion to the effect that FAI's letter of 19 March 1986 did not prevent time running against the respondent under the Limitation Act; accordingly, the respondent's claim against Dennison was statute barred. The barrister advised that proceedings for negligence be brought against Mendes. 10 On 14 January 1992, the appellant, on the respondent's behalf, discontinued the proceedings against Dennison. On 26 May 1993 the appellant issued a statement of claim on the respondent's behalf against Mendes, claiming damages for professional negligence in allowing the respondent's claim against Dennison to become statute barred. 11 On 11 November 1996 the respondent's action against Mendes came on for hearing before Murrell DCJ. On 13 November 1996 her Honour delivered judgment in which she held that FAI's letter of 19 March 1986 was "confirmation" within the meaning of s 54 of the Limitation Act of the respondent's cause of action against Dennison. Murrell DCJ held, accordingly, that the respondent's claim against Dennison had not been statute barred on 9 April 1991 when the appellant commenced proceedings against him on the respondent's behalf. She observed: "… the proceedings against Mr Dennison were commenced within time, the plaintiff sustained no loss as a result of negligence by the defendant, and the plaintiff must fail in these proceedings".

Although Murrell DCJ dismissed the respondent's action, she assessed his damages at $146,117. 12 On 14 February 1997 the appellant wrote to the respondent stating: "We advise that you should obtain independent legal advice from another solicitor about your rights in relation to your Appeal or any other further action you wish to take as a result of Judgment in favour of the Defendant. One of the options currently available to you as an alternative to your appeal is an action against Cheney & Wilson. Naturally we cannot advise you in relation to that. If, after obtaining independent legal advice, you are happy to proceed with your appeal with us acting for you we can continue to act for you in your appeal". 13 The respondent chose to retain the appellant to continue with his appeal against the judgment of Murrell DCJ. On 29 March 1998 this Court upheld her Honour's decision. 14 Thereafter the respondent retained yet another firm of solicitors who, on 1 March 1999, commenced proceedings on his behalf against the appellant.

Chronological summary 15 At this stage it would be helpful to set out a chronological summary of the relevant facts and circumstances.

24 December 1983 Respondent injured by Dennison in motor vehicle accident.

19 March 1986 FAI accepts liability for respondent's claim.

March 1988 The respondent retains Mendes as his solicitors. 23 December 1989 Date on which limitation period in respect of the respondent's claim against Dennison would have expired, but for FAI's letter of 19 March 1986.

9 March 1990 Mendes informs the respondent that the limitation period has expired and he is statute barred from proceeding with his claim.

August 1990 The respondent retains the appellant as his solicitor.

9 April 1991 The appellant files statement of claim for the respondent against Dennison.

30 October 1991 Counsel advises that FAI's letter of 19 March 1986 did not prevent time running against the respondent and the respondent's claim against Dennison is statute barred. He recommends that action be instituted against Mendes.

14 January 1992 The appellant discontinues the proceedings against Dennison.

19 March 1992 The limitation period relating to the respondent's claim against Dennison expires.

26 May 1993 The appellant files a statement of claim on the respondent's behalf against Mendes.

13 November 1996 Murrell DCJ delivers judgment holding that limitation period against Dennison did not expire until 19 March 1992.

14 February 1997 Appellant writes to the respondent advising him that it was open to him to sue it.

19 March 1998 Date on which, according to the appellant, the limitation period relating to the respondent's claim against it expired.

29 May 1998 The Court of Appeal dismisses the appeal from the decision of Murrell DCJ.

1 March 1999 Respondent issues a statement of claim against the appellant.

The pleadings and the application for summary judgment 16 The respondent's statement of claim against the appellant alleged causes of action in contract and common law negligence. Essentially the statement of claim asserted that the appellant had breached its contract of retainer with the appellant and was negligent in a number of respects. It was alleged that, in consequence, the respondent "lost all prospects of recovering damages from Dennison". By the prayer, the respondent claimed those damages from the appellant. No other relevant substantive relief was claimed. 17 The appellant filed a defence to the statement of claim asserting: "[T]he cause of action accrued more than six years before the commencement of the proceedings and accordingly is barred pursuant to s 14 of the Limitation Act 1969". 18 The appellant proceeded to apply for summary dismissal of the respondent's statement of claim. The application was heard by O'Reilly DCJ who, on 4 February 2000, dismissed the appellant's application. 19 His Honour based his decision on two grounds. Firstly, he said that it would be an injustice to the respondent to make a finding adverse to him without seeing him in the witness box. For that reason, he declined to grant summary judgment against him. 20 Secondly, O'Reilly DCJ referred to the observation by Deane J in Hawkins v Clayton (1988) 164 CLR 539 (at 590) that "the reference in s 14(1) [of the Limitation Act] to the cause of action first accruing should be construed as excluding any period during which the wrongful act itself effectively precluded the institution of proceedings". He then said that: "[I]n practical terms [the respondent] was precluded from doing anything whatever until told of Murrell DCJ's judgment".

O'Reilly DCJ held that it was arguable that the limitation period did not commence to run until 13 November 1996, the date of the judgment of Murrell DCJ. 21 Counsel for the respondent rightly did not attempt to support the finding that there were factual disputes which would preclude an order for the summary dismissal of the respondent's claim. There were no such factual disputes. The relevant factual material is set out above and is common cause. 22 Essentially, therefore, this appeal turns on the applicability of the rule enunciated by Deane J in Hawkins v Clayton and relied on by O'Reilly DCJ.

The general rules relating to the statute barring of actions for professional negligence

23 Irrespective of whether the rule espoused by Deane J applies to this case, the general rules relating to the statute barring of actions for damages arising out of professional negligence are well-settled. The Deane J rule needs to be seen in the context of these general rules, which I set out below. 24 A cause of action is not complete until the plaintiff suffers actual (and not contingent or prospective) loss or damage: Hawkins v Clayton at 561 to 562, 588; 600 to 601; Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 530 to 531; Scarcella v Lettice [2000] NSWCA 289. 25 For a plaintiff's cause of action to be complete, the actual damage must be "measurable" (Wardley at 531), or "beyond what can be regarded as negligible" (per Handley JA in Scarcella). 26 A cause of action accrues when it is complete and, ordinarily, a cause of action for negligence first accrues when the plaintiff first suffers damage caused by the defendant's breach of duty: Hawkins v Clayton at 561 per Brennan J and 588 per Deane J; Pirelli General Cable Works Limited v Oscar Faber & Partners (a firm) [1983] 2 AC 1; Sampson v Zucker (NSW Court of Appeal, unreported, 11 December 1996); Scarcella. 27 An action for damages against a solicitor, where the solicitor negligently fails to commence proceedings for a claim for personal injury within the statutory period, is a claim for damages for loss of a chance of recovering damages for those personal injuries: Johnson v Perez (1988) 166 CLR 351; Nikolaou v Papasavas, Phillips & Company (1989) 166 CLR 394 at 402 to 404. In such a case, the plaintiff's loss crystallises when the action becomes statute barred (cf Johnson v Perez at 366 to 367). 28 Generally, where, through the negligence of solicitors, a client's cause of action becomes statute barred, the client's right of action in negligence against those solicitors accrues at the time the action becomes statute barred, and damages are to be assessed at that time: Nikolaou; Scarcella; Sampson v Zucker; Registrar-General v Cleaver (1996) 41 NSWLR 713 per Clarke JA at 719; Hetherington v Mirvac Pty Limited (1999) Aust Torts Reports 81- 514; Crisp v Blake (1992) Aust Torts Reports 81-158; Toomey v WALS (1999) NSWSC 560; Wilson v Rigg [2000] NSWSC 16; Di Sante v Camando Nominees Pty Limited [2000] VSC 211; Doundoulakis v Antony Sdrinis & Co [1989] VR 781. 29 There is no "general overriding qualification" to the effect that a limitation period does not begin to run "until the stage is reached when the plaintiff discovers, or could on any reasonable inquiry have discovered, that the loss has been sustained": Wardley at 540 per Deane J; Hawkins v Clayton at 561 to 562 per Brennan J, at 587 to 588 per Deane J, at 599 to 601 per Gaudron J; Sampson v Zucker; Scarcella.

The principle enunciated by Deane J in Hawkins v Clayton and its application

30 In Hawkins v Clayton Deane J expressed the opinion that the general rule as to when a cause of action accrues might be subject to qualification in some special circumstances. 31 The essence of the exception as so enunciated is that it applies when the very act of negligence that inflicts the injury also has the effect of precluding the bringing of an action for damages. There must be a coincidence between the negligent conduct and the conduct that conceals from the plaintiff that he or she has a cause of action. 32 The practical operation of the exception so propounded is best seen from the unusual circumstances of Hawkins v Clayton itself. In that case the wrongful action that inflicted the injury was the negligent failure of the defendant firm of solicitors to inform the plaintiff of the existence and contents of the testatrix's last will. Injury was inflicted by reason of that negligent failure, because, in consequence, a tenant could not be found for the property of the estate (and other damage was suffered, as well). But, at the same time as causing the injury, the defendant's negligence concealed from the plaintiff the existence of the cause of action. 33 In the present case, the only damage that the respondent alleges that he suffered is that caused by the failure to sue Dennison before the expiry of the statutory time limits. The appellant's alleged wrongful acts that caused the loss of the chance to sue Dennison did not, however, conceal from the respondent the fact that he might have a claim against the appellant for its negligence in regard to its conduct of the proceedings against Dennison. The appellant's wrongful acts did not cause the respondent to be unaware of his right to sue the appellant, and there is no suggestion that, at the relevant period, he was unaware of that right. 34 A similar situation obtained in Sampson v Zucker. This case involved an action for personal injury that was not brought within the statutory time period. The failure to sue timeously resulted in a claim against the solicitors for negligence. Gleeson CJ (with whom Cole JA and Simos AJA agreed) pointed out that Deane J's exception to the general rule did not avail the plaintiff because the defendant solicitors' acts of negligence did not preclude the plaintiff from "doing anything". In particular, they did not prevent the plaintiff from taking other advice and suing the defendant. A similar approach has been adopted in Scarcella (per Giles JA); Toomey v WALS; Wilson v Rigg and Hetherington v Mirvac Pty Limited (in particular, at 66,023).

The particulars of negligence and breach of contract 35 Certain of the particulars of negligence and breach of contract pleaded by the respondent appear to relate to loss suffered by the respondent resulting from the lost opportunity of suing the appellant, itself. 36 The particulars in question allege, in substance, that the appellant was negligent in failing to advise the respondent, before his claim against the appellant became time barred, that he should have sued the appellant itself. I express no opinion as to whether such an action is maintainable in law. 37 Counsel for the respondent informed this Court that the purpose of those particulars (particulars 19 (p) to (t)) was to assert a "fresh breach of duty by the solicitors in negligence … which would be a fresh cause of action". He was not prepared to accept the proposition that any of those particulars were pleaded in an attempt to bring the case closer to one to which the principle expressed by Deane J in Hawkins v Clayton might apply. 38 The difficulty for the respondent in regard to any such fresh cause of action is that it is based on the loss of a chance to sue the appellant itself in a context in which there is no allegation in the statement of claim that the respondent ever sustained such a loss. 39 It is perhaps arguable that certain of the conduct alleged in the particulars in question failed to bring home to the respondent the fact that he had a cause of action in negligence against the appellant for the loss of a chance to sue it. Such an argument, however, would not make the rule expressed by Deane J in Hawkins v Clayton applicable as that conduct could not be said to have caused the loss actually claimed by the respondent in his statement of claim, namely, the loss of the chance to sue Dennison.

Conclusion 40 The facts of this case are such that the rule expressed by Deane J in Hawkins v Clayton does not apply. As mentioned, the respondent's statement of claim does not allege conduct on the part of the appellant that could be said to have had the effect of precluding the respondent from suing Dennison before his claim against Dennison became statute barred. The wrongful acts asserted by the respondent against the appellant, resulting in the loss of the chance of suing Dennison, did not preclude the respondent from bringing proceedings for the recovery of such loss within the statutory period. 41 The respondent's position is indeed unfortunate and the facts of this case do not reflect well on the legal profession. Nevertheless, in the circumstances, O'Reilly DCJ should have granted summary judgment in favour of the appellant. 42 I should record that during the course of argument, senior counsel for the appellant informed the Court that, should the respondent take further proceedings against the appellant, the appellant would not raise an Anshun estoppel against a cause of action based on the particulars relating to the respondent's loss of the opportunity of suing it (that is, those particulars pleaded by the respondent in paras 19(p) to (t) of its statement of claim). If this assurance had not been given the Court may have struck out the statement of claim in whole or in part, and given leave to the respondent to re-plead. 43 I propose that the appeal be upheld, summary judgment be ordered in favour of the appellant, and an order be made dismissing the respondent's claim against the appellant with costs. The Respondent to have certificate under the Suitor's Fund Act, if so entitled. **********

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At a glance

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Judgment (43 paragraphs)

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Legislation Cited (1)

Cases Cited (8)