Monday 28 June 2004
DAVID SPENCER CHURCHILL v JOHN MICHAEL CONNOLLY
Judgment
1 BEAZLEY JA: I agree with Young CJ in Eq.
2 HODGSON JA: I agree with the orders proposed by Young CJ in Eq. and, subject to what I say below, substantially with his reasons.
3 In this case, there could be no claim for compensation consequential on entry into the contract or failure to terminate it: the appellant concedes that the contract was advantageous, but contends that, but for breaches of duty by the respondent and his partner, it would have been more advantageous.
4 A caveat was placed on the title on behalf of a beneficiary in July 1983. The appellant and his wife instructed new solicitors at or about the end of 1984, but did not commence proceedings for specific performance of their contract until after 1990. There is no possible basis for saying that any breach of duty by the respondent or his partner occurring after July 1983 caused any loss.
5 So the question is, was there some breach or breaches of duty occurring prior to July 1983 causing loss to the appellant in relation to the carrying into effect of the contract?
6 The primary judge found there was no relevant negligence. The respondent and his partner were unable to cause the contract to be completed, because the vendor was not the registered proprietor. They were deceived by the solicitor with the conduct of the task of getting the vendor on the title. Once the respondent realised that the only way to proceed was to take over the task, he sought instructions from the vendor. She delayed giving such instructions; but once those instructions were given, the respondent moved with reasonable expedition to take over the task, and to pursue it. From the time he took over the task in December 1982 to the time the caveat was lodged in July 1983, the primary judge found nothing in his conduct of the matter that could be criticised.
7 I agree with Young CJ in Eq. that there is no basis for overturning those findings.
8 That leaves the question of whether there was a breach of fiduciary duty in acting for both vendor and purchasers between entry into the contract in April 1980 and the lodging of the caveat in July 1983, causing loss to the appellant.
9 Had the respondent ceased to act for the appellant in or after December 1982, the most that any solicitor acting for the appellant could have done then was to put pressure on the respondent to expedite the matter, or to commence specific performance proceedings. Having regard to the primary judge's findings that the respondent acted with reasonable expedition between December 1982 and July 1983, there is no basis for concluding that either course would have resulted in completion prior to the lodging of the caveat, or any result more favourable to the appellant than actually occurred.
10 So the remaining question is whether the respondent should have ceased to act for the appellant well prior to December 1982. In effect, it is now submitted that it was clear before the end of 1980 that the vendor was in very serious breach of contract, giving rise to such a substantial conflict of interests that the respondent and/or his partner should have ceased to act for the appellant and his wife. Had this happened, and appropriate pressure been applied by an independent solicitor acting for the purchasers, the contract would have been completed before the caveat was lodged.
11 One difficulty with this is that this case was not put below. It was alleged in the Statement of Claim that the respondent, in breach of fiduciary duty failed conscientiously to withdraw from the matter, and negligently failed to take proper steps to ensure the title was conveyed to the appellant and his wife. In opening the case, it was put that there was failure to deal with conveyance properly after exchange, particularly in putting pressure on the vendor. It was put in cross-examination that "conflict or the potential for that conflict" of interests had existed as early as April 1980; but not that a conflict requiring withdrawal had arisen by reason of the vendor's breaches of contract in late 1980 or indeed at any time prior to December 1982. There was no relevant submission in final addresses.
12 The case that might possibly have been made, as noted above, was that, following withdrawal by the respondent or his partner, pressure from an independent solicitor would have resulted in completion. In my opinion, at the very best, there was a chance that such pressure (whether applied with or without commencement of specific performance proceedings) may have resulted in the task of obtaining registration for the vendor being taken over earlier than December 1982, so that completion may have been achieved prior to a caveat being lodged. At most, the appellant would be entitled to compensation for loss of that chance.
13 On the available material, I would rate that chance as extremely slim. However, in my opinion the Court may not have available all the material that would go to the assessment of that chance, because that case was not put below. Accordingly, without determining whether there was a breach of fiduciary duty in failing to withdraw in or about late 1980, in my opinion this possible case should be rejected on the basis of Suttor v Gundowda Pty Ltd (1950) 81 CLR 418.
14 YOUNG CJ in EQ: This is an appeal from his Honour Judge Dodd in the District Court dismissing the plaintiff's claim for damages or equitable compensation against his former solicitor. The appellant below put his claim in tort for breach of duty of care, or alternatively, for breach of fiduciary duty.
15 The appellant's claim arises out of a contract for the sale of property at 31 Dans Avenue, Clovelly entered into by him and his then wife as purchasers, the vendor being one Leila Marlow Fryer on 2 April 1980. The purchase price in the contract was $50,000.
16 Up until her death on 8 July 1941, Mrs Ida Mary Fryer was the owner of the property. Indeed, as at the date of the contract, 2 April 1980, and even on 16 December 1993, Ida Mary Fryer was still registered as proprietor of the property. The will of Ida M Fryer of 3 August 1933 was admitted to probate by this Court on 2 October 1941, Leila M Fryer and another were the executors of that estate.
17 As circumstances fell out, as at 2 April 1980, provided the estate had been fully administered, the property was to pass to the estate of John Gordon as to a three-eighths share, to Leila Fryer as a three-eighths share, and to various people surnamed Steele for a one-quarter share.
18 The actual will provided that Ida M Fryer's husband who died on 31 July 1954 was to have a life interest in the house and that the testatrix's five daughters would then take the proceeds in equal shares. Two daughters died intestate so that one has the present split-up.
19 Because of the provisions of the Stamp Duties Act 1920, particularly s 102(2)(g) imposing cesser duty, although initially the death duty payable on the estate was duly paid and a certificate was obtained that the head estate was not liable to Federal Estate Duty, duty became payable on the cessation of various beneficiaries' interests in the estate.
20 The Commissioner of Stamp Duties required that these duties be paid before he would mark the executors' transmission application. There was evidently some argument as to whether there was a quick succession rebate due, but for whatever reason as at the date of the contract the Commissioner had not marked the transmission application in such a way that the Registrar General would register it, and accordingly it had not been registered.
21 Leila M Fryer was living in the property until March 1980. It was in a very run down condition. She wished to move out of it and was willing to sell to the appellant who appears to be a friend of her family for a good price. The appellant and his wife moved into the property in April 1980 after the contract and commenced putting the place into good repair. Leila M Fryer died on 6 July 1983 and in due course probate of her will was granted to Mollie Stokes who became the executor by representation of the estate of Ida M Fryer.
22 As at April 1980 it appeared that John Gordon, who was entitled to a three-eighths share of the estate, was happy with the sale at the discount price. However, he died on 10 September 1981 and one Alan Malcolm Campbell became his executor. Mr Campbell considered that he needed to protect the beneficiaries under his estate and lodged a caveat, T639635 against the title to the property on 12 July 1983, six days after the death of Leila M Fryer.
23 In proceedings in the Equity Division of this Court, No 5189 of 1990, Mollie Stokes sought possession of the property from the appellant and his wife. They cross claimed for specific performance.
24 On 16 December 1993, Santow J held that because the "good purchase price" was at under-value the appellant and his wife were not entitled to specific performance. They were, however, entitled to damages for the loss of their bargain, the rule in Bain v Fothergill (1874) LR 7 HL 158 not applying in the circumstances. His Honour stood the matter over for short minutes to be brought in.
25 Following his Honour's judgment the parties settled the matter and his Honour ordered on 30 August 1994 that there be specific performance with an increase of price of $185,000, that is, in addition to the contractual price and that there be no order for costs in the proceedings.
26 The appellant with his wife were still in possession in 1994. It was found that when the increased purchase price was produced, the problems with the Stamp Duties Office faded away and the conveyance was able to be settled without problem.
27 The present proceedings were commenced on 15 December 1999 by the appellant against the present respondent. The claim was that the respondent and his former partner, Mr Salmon, were negligent, particularly in failing to realise the state of the title, failing to take proper steps to ascertain that Leila M Fryer had a valid power of sale, failing to take proper steps to ensure title was conveyed to the Churchills and failing to effect settlement of the conveyance within a reasonable time. As I have said, the claim was put alternatively on the basis of breach of fiduciary duty.
28 Shortly before the hearing, the plaintiff gave the defendant a notice to admit 94 different facts. Forty-four of these were admitted. It was also common ground between the parties below that all that was found by Santow J was to be accepted as a finding of fact in the District Court and that the Judge was also entitled to rely completely on Santow J's reasons.
29 As I have said, the trial judge found a verdict for the defendant.
30 Before turning to the notice of appeal I should deal with one other matter. It is clear that the people who had Messrs Salmon and Connolly as their solicitors, were both the appellant and his wife. There has evidently been some estrangement between the couple more recently. Originally the proceedings in the District Court were taken in the name of the appellant alone. However, after the trial commenced, Mrs Churchill appeared, and after oral application, she was added as a defendant. The Judge was also given a notice of assignment under s 12 of the Conveyancing Act 1919 which said that she irrevocably assigns to the appellant all her right, title and interest in the present proceedings to the appellant (the document is Blue p 344). The assignment is dated 30 January 2002, that is, well after the proceedings had been commenced and perhaps after the expiry of the relevant limitation period. The hearing commenced before the District Court on 10 April 2002. The joinder was made on 12 April 2002; see Black 65 and following.
31 There seems little doubt that the right against the solicitor was a joint right. Procedurally, in accordance with District Court Rules Part 7 r3, where the plaintiff claims an amount to which any other person is entitled jointly with him all persons so entitled shall be parties to the action. Part 7 r7 provides that no action is to be defeated by reason of non-joinder of any person as a party. Identical rules appear in the Supreme Court Rules as respectively Part 8 r3 and Part 8 r7.
32 The technicalities involved with joint contracts (to take a simple example) were very great before the Judicature Act system and indeed Professor Glanville Williams was easily able to produce a full book on the subject in his "Joint Obligations" (Butterworths, London, 1949). Most of the problems occurred with joint defendants, it being an almost sacred rule that a defendant who was jointly liable on a contract together with other defendants could successfully plead in abatement and force the plaintiff to add the co-obligors as defendants so that it would be clear who had to contribute to the damages; see Glanville Williams op cit Chapter 2. There are not as many authorities dealing with problems where there were or should have been joint plaintiffs.
33 However, in cases where there had been a reluctant co-plaintiff the court has been content with merely adding the co-contractor as a defendant so that it is possible for all the parties to be bound by the action; see eg Burnside v Harrison Marks Productions Ltd [1968] 1 WLR 782. There does not seem to be any rule that a joint right can only be enforced by action brought by all the holders of the joint right.
34 Accordingly, the addition of the wife as a defendant on the third day of the hearing was sufficient to cure any problem with Part 7 r3. Thus it is not necessary to make a decision as to whether Part 7 r7 overrides or trumps Part 7 r3.
35 In Kenya, which has the same rules, there is a decision in Lochab Bros v Kenya Furfural [1985] Law Reports of the Commonwealth, Commercial 737, 750, that a deliberate non-compliance with Part 7 r3 entitles the Judge to dismiss the action notwithstanding Part 7 r7. That is because rule 7 applies to a "mere" non-joinder and does not govern the case where it is necessary to have all holders of the right before the Court for the Court to be able to adjudicate on the issue. A similar decision was reached by the Court of Appeal for East Africa in Qureshi v Patel (1951) 18 EACA 1.
36 These authorities are weakened by the fact that they appear to have proceeded on a misunderstanding of the decision of Kanti Chandra Tarafdor v Radhu Rahman Sarkar (1930) 17 AIR (Cal) 461, which was evidently not available in East Africa, but is available in the Law Courts Library, Sydney. My present view is that I would follow the court in Kenya, but I should not decide the question until it arises for direct decision.
37 The other point that arises on the assignment is whether the assignment having taken place only in January 2002, there was some adding of a new cause of action outside the limitation period.
38 So far as the action at law in negligence was concerned, there was a common law chose of action which was not vested in the appellant as at the date of the commencement of the proceedings. That cause of action would have been added on the date on which the amendment was made under Part 17 r3A of the District Court Rules. So far as the claim for breach of fiduciary duty was concerned, that was an equitable cause of action and s 12 of the Conveyancing Act would have no application though the document may have been evidence that there had an equitable assignment. It is best to leave these problems until after dealing with the main issues in the appeal.
39 In his notice of appeal the appellant said that he was entitled to judgment for $185,000 being the additional consideration he had to pay to secure the property, $70,555 being his costs of the Equity proceedings, and interest on those sums totalling $247,279.44 as at 8 March 2004.
40 The learned Judge held that the plaintiff suffered no loss through the defendant's conduct. As to this, the appellant says that the trial judge should have found that there was a window of time up until July 1983 when the conveyancing transaction could and should have been completed and that the failure by the solicitor to complete the contract during this period has caused the loss detailed above.
41 On the appeal, Mr J Marshall SC and Mr M Evans appeared for the appellant and Ms J Oakley appeared for the respondent. I am indebted to all counsel for their learned submissions.
42 Because the parties accepted everything that Santow J said about facts and law, a good starting point is his Honour's judgment in Stokes v Churchill. His Honour said (Blue 306) that by letter of 25 August 1975 the then solicitors for Leila M Fryer, Messrs Carmont & Cordingley, advised her that they had prepared the necessary documents to transmit the title of the property into her name. They lodged the appropriate documents with the Stamp Duties Office on 4 September 1975. On 8 October 1975, the Commissioner raised two requisitions, one relating to the estate of Ida Fryer's husband Sydney, and the other in respect of the estate of Kathleen Steele, one of Ida's daughters. Santow J said:
"Nothing further seems to have happened to satisfy these requisitions. Despite requests for action by the Stamp Office, and a desultory exchange of correspondence, Mr Cordingley (on behalf of Leila Fryer as executor) advised the Commissioner of Stamp Duties in November 1977 that outstanding matters had not been finalised."
43 His Honour then went on to say that Leila Fryer, who had been living in the house, was concerned about her position. The property was in need of substantial repairs and renovation. She knew the Churchill family well and knew that the appellant and his wife were wanting to buy a home. They entered into an agreement to buy the property at a low but realistic price of $50,000, but no undue influence or unconscionable conduct took place on the part of the appellant or his wife in securing the property at an under-value. His Honour considered that the value of the property at the relevant time was $90,000 to $100,000.
44 Santow J then continued (Blue 308):
"Land tax remained payable on the estate of Ida Mary Fryer. Administration of the estate of Ida Fryer depends upon completion of various matters including the administration of the Gordon estate, before transmission of the property into the name of the executor could take place.
Cordingley, the solicitor responsible for winding up the estate, had not obtained transmission of the title into the name of Leila Fryer as at 23rd December 1982 when he finally handed his files over to Messrs Salmon Connolly. The sorry tale of his 'neglect of his client's interests' and totally ineffectual efforts in acting for the estate in completing its administration, with its implications for the Churchills, emerges starkly in the Law society's Statement of Findings and Orders of the Solicitors' Statutory Committee delivered on 25th February 1985.
In a detailed letter dated 7th February 1983, Messrs Salmon Connolly wrote to the Commissioner of Stamp Duties about the position of the Estate of Ida Mary Fryer and related matters. From a file note which follows that letter it appears that a verbal reply was received on or about 21st April 1983."
45 I should interpolate here that somewhere between December 1984 and February 1985 Messrs Salmon Connolly ceased to act on behalf of Mr and Mrs Churchill. They continued to act for the estate. As at the date of hearing before Santow J the subject property was the only asset in the estate. It was subject to three caveats, one for land tax and others by beneficiaries and there had not been any transmission application because of the difficulties with the Stamp Duties Office.
46 I should say that it would seem that the difficulties with the Stamp Duties Office principally appear to have related to the non-filing of an Affidavit HH specified in the Stamp Duties Regulations (see Hill, Stamp Death Estate and Gift Duties (Law Book Company, 1970) p 503). An affidavit in form HH was required to be made by a person in whom non-aggregated property liable to cesser duty is vested so far as the estate of Sydney Fryer is concerned and the non-compliance with the estate of Kathleen Fryer in filing an Affidavit M (see Hill pp 478-9). This is an affidavit to be filed when there has been no grant of probate in a small estate. The primary obligations to file these documents may well have been in people other than those able to be compelled by Leila M Fryer or her solicitor, though it is to be noted that when money became available for the purchase at a proper price these difficulties melted away.
47 Santow J said that there was evidence to suggest that the Churchills' solicitors anticipated releases from the Steele family and Gordon, but no reasonable endeavours were made by the vendor at the time of the contract or within a reasonable time thereafter to obtain those releases if they were needed.
48 Santow J then held that the administration of the head estate had not been concluded. The executor was not functus officio and retained a statutory power of sale for the purpose of administration. In addition there was some power of sale in the will. His Honour concluded that Leila Fryer had power of sale over the property on each of these bases. He concluded that she sold as executor not trustee either under the statutory power of sale or pursuant to the power in the will. His Honour then referred to Colyton Investments Pty Ltd v McSorley (1962) 107 CLR 177 and said that the court should not foist specific performance onto an estate when not satisfied of the fact that the estate was receiving proper value for the property.
49 However, his Honour found that the Churchills were entitled to damages and that the rule in Bain v Forthergill did not apply.
50 At Blue 325 his Honour concluded by saying that the Churchills were entitled to damages to place them as nearly as may be in the position they would have been had the breach not occurred. He cited Wenham v Ella (1972) 127 CLR 454 and said that:
"In all the circumstances, I consider that damages should be assessed at the expiry of 12 months from the date the contract was repudiated, that is to say 9 July 1987. The 12 months fairly reflects the complexities which confronted the Cross-Claimants and recognises that they should have had a reasonable opportunity to assess their position. Equally, to assess damage at the date of judgment, when the property had increased in value quite markedly, would be unfair to the Cross-Defendants, given the considerable delay by the cross-claimants in bringing their action."
51 His Honour then referred to other authority where the date of repudiation or breach was preferred to the date of judgment.
52 Santow J said that on the evidence before him he would adopt the value of $145,000 as at 27 September 1986 as being the value in July 1987 unless some other value was established and would allow interest from that date with a deduction for unpaid rent.
53 As I have said, after that time there was a settlement of the whole conveyance. Mr Marshall puts that it is clear that it was a fair bargain. His client was entitled to bargain away the right to costs and the right to damages in return for buying the property for $185,000 extra. He points to admitted facts 93 and 94, viz:
"93. Following the judgment given by Santow J in proceedings No 5189 of 1990 the plaintiff and Kim Irene Churchill had no right or means of obtaining title to the Clovelly property save and except by some further agreement with Mollie Stokes and those interested in the estate of the late Ida Mary Fryer.
94. On or about 30 August 1994 the plaintiff and Kim Irene Churchill made an agreement with Mollie Stokes, Alan Campbell and John Joseph Steele (on behalf of the Steele interests in the estate of the late Ida Mary Fryer) which agreement was embodied in short minutes of orders made finally disposing of proceedings No 5189 of 1990 in the Supreme Court of New South Wales."
54 Those admitted facts do not go quite far enough. However, Mr Marshall says that the bargain was struck at arm's length between people who were trying to do the best for themselves, there was never any allegation below that it was a bad bargain and the court should hold that it was necessary to pay $185,000 in order to secure the property because of the negligence or breach of fiduciary duty of the respondent.
55 It is significant that the claim is put in the alternative in negligence at common law and breach of fiduciary duty.
56 Up until recently, with small exceptions, the District Court was purely a court of common law. However, under s 134(1)(h) the Court now has jurisdiction to hear any equitable claim or demand for recovery of money or damages in an amount not exceeding $750,000.
57 It is clear from the authorities that very different principles may apply to common law actions in negligence on the one hand and claims for equitable compensation for breach of an equitable duty on the other hand with respect to causation, foreseeability and remoteness of damages; see eg Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, 89-93 and Youyang Pty Ltd v Minter Ellison [2001] NSWCA 198 [16].
58 Although it is a difficult matter, courts at first instance and on appeal must be careful to observe these differences and really need to deal separately with the common law counts and the equitable counts before them, rather than endeavour to deal with the counts globally.
59 I consider that there is a lot to be said for the proposition which I espoused in Youyang at [50] that if a person has a good remedy for damages in negligence, there is cause for equity to intervene by the remedy of equitable compensation only to the extent to which common law damages are clearly inadequate. Youyang was reversed in the High Court; see Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 77 ALJR 895, but the passages to which I have referred were unaffected.
60 I believe that I have now set out the facts and the surrounding circumstances in sufficient detail to be able to deal with the decisions that need to be made on this appeal.
61 However, before I do so, I should note two significant matters with respect to the conduct of the trial.
62 The first is that apart from a few pages of transcript in which Mrs Kim Churchill made her appearance before the court, the only evidence was given by the plaintiff and the defendant. There was no expert evidence given at all. There was no external evidence to support the view that the increase in price of $185,000 was fair and reasonable.
63 The second is that the principal way in which the appellant put his case to this Court was that there was a window of opportunity which, whilst it was open, allowed the appellant to have the contract of sale completed at the price referred to in the contract. That window of opportunity closed on or about the death of Leila M Fryer or John Gordon. Thereafter, if the appellant was to obtain the property he had to pay much more for it.
64 Mr Marshall says that whilst the case may not have been put quite this way below, such a way of putting the case is within the pleadings and was within what was put to the trial judge. Ms Oakley does not agree with this. Although she faintly said that there was a situation that the trial might have been run differently had the point been raised, it does not seem to me that there is sufficient material to make good that assertion.
65 In this background then I must deal with the matters that arise and I believe the following is a convenient way in which to consider them.