Curnuck v Nitschke

Court of Appeal (NSW)|2001-06-08|Before: Meagher JA, Le Dain J, Deane J, Gleeson CJ, Hayne JJ, Callinan J

CITATION : Curnuck v Nitschke [2001] NSWCA 176 FILE NUMBER(S) : CA 40387/00 HEARING DATE(S) : 8 June 2001 JUDGMENT DATE : 26 June 2001

Milton Robert Curnuck (App) Alan Harold Curnuck (App) Ivan John Curnuck (App) PARTIES : Galva Dennis Nitschke (Resp) John Hayden Williams (Resp) Trevor John Forbes (Resp) Bruce Jarrat (Resp) t/as Sheekey Williams & Nitschke JUDGMENT OF : Meagher JA at 1; Davies AJA at 2; Fitzgerald AJA at 15

LOWER COURT JURISDICTION : District Court LOWER COURT 1479/99 FILE NUMBER(S) : LOWER COURT Delaney DCJ JUDICIAL OFFICER :

A. McInnes QC (App) COUNSEL : M. Stubbs (App) D. Davies QC (Resp) D. Roberts (Resp) SOLICITORS : Phillip Parbury & Associates (App) McLachlan Chilton (Resp) CATCHWORDS : Professional negligence - contract - tort - limitation period - instructions to advise and sue third party - assignment and reassignment of cause of action against third party - omission to commence action against third party or to advise of limitation period - breach of contract and tort. Bankruptcy Act 1966 LEGISLATION CITED : Limitation Act 1969 Trade Practices Act 1974 Astley v Austrust Ltd (1999) 197 CLR 1 Central Trust Co v Rafuse (1986) 31 DLR (4th) 481 Chappel v Hart (1998) 72 ALJR 1344 Hawkins v Clayton (1988) 164 CLR 539 CASES CITED: Heydon v NRMA (2000) 36 ACSR 462 Hill v Van Erp (1997) 188 CLR 159 Perre v Apand Pty Ltd (1999) 73 ALJR 1190 Rogers v Whitaker (1992) 175 CLR 479 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 DECISION : Appeal allowed with costs. Judgment below set aside. Declare that the solicitors breached their contractual duty and their duty under the law of tort to the clients. Remit to the District Court for a different judge to determine whether the solicitor's breach caused the clients any loss. The costs of the District Court proceedings be reserved to the judge who determines the issue of damages.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

1 Meagher JA: I agree both with Fitzgerald AJA and with Davies AJA. In my opinion the orders suggested by Fitzgerald AJA should be made. 2 DAVIES AJA: In Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, in which the principal judgment was given by Lord Goff, with whom Lord Keith, Lord Browne-Wilkinson, Lord Mustill and Lord Nolan agreed, it was held that duties of care arising under both contract and tort may be owed concurrently and may be sued concurrently. At p 191, Lord Goff cited Le Dain J in Central Trust Co v Rafuse (1986) 31 DLR (4th) 481, where his Honour said, at p 522:- " A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort. Subject to this qualification, where concurrent liability in tort and contract exists the plaintiff has the right to assert the cause of action that appears to be the most advantageous to him in respect of any particular legal consequence ." 3 At p 193, Lord Goff rejected the view, expressed by Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 585, that there was no justification or need to imply a contractual obligation of care in a contract between a solicitor and his or her client which is coextensive in content and concurrent in operation with the duty of care which exists under the negligence. 4 This view was approved and followed by Gleeson CJ, McHugh, Gummow and Hayne JJ, Callinan J dissenting, in Astley v Austrust Ltd (1999) 197 CLR 1. Their Honours concluded at p 23 that:- "The theoretical foundations for actions in tort and contract are quite separate. Long before the imperial march of modern negligence law began, contracts of service carried an implied term that they would be performed with reasonable care and skill. Persons who give consideration for the provision of services expect that those services will be provided with due care and skill. Reliance on an implied term giving effect to that expectation should not be defeated by the recognition of a parallel and concurrent obligation under the law of negligence. The evolution of the law of negligence has broadened the responsibility of professional persons and requires them to take reasonable care and skill even in situations where a contractual relationship cannot be established." 5 The rejection of the view expressed by Deane J in Hawkins v Clayton led McPherson AJA to say, in Heydon v NRMA Ltd (2000) 36 ACSR 462 at 567-568, that the decision in Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 of Kirby P and Hope AJA, Mahoney JA dissenting, was no longer good law. 6 However, I do not read the decisions in Henderson v Merrett Syndicates Ltd and Astley v Austrust Ltd as leading to that conclusion. The fact that the causes of action in tort and contract may be concurrent does not mean that their incidents are necessarily the same. Under contract law, duty turns upon the terms, scope and context of the contract. Under torts law, issues of proximity and foreseeability are crucial to liability. Public policy may play a part. And there are many other differences. The respective laws on damages are different. The principles of contributory negligence and contribution differ as between the causes of action. The limitation periods may be different. A plaintiff is entitled to sue in both contract and in tort or in either, and may choose the best result. 7 Waimond Pty Ltd v Byrne seems to me to be well based upon the principle enunciated in Henderson v Merrett Syndicates Ltd and Astley v Austrust Ltd. In that case, the duty of a solicitor to speak with his client with respect to a certain transaction did not arise from his contractual retainer. It arose out of the relationship of proximity which existed between the solicitor and his client. The solicitor knew that a transaction, which he had been instructed to carry out for another client, affected the interests of his client. The majority of the Court considered that the circumstances were such that the solicitor had a duty to check with his client or to advise him to seek independent advice. 8 It is one thing to say, where a solicitor has a contractual relationship with a client and where the matter in issue arises within the scope of the retainer, that there will be no difference between the duty of care imposed by the contract and that imposed by the law of negligence. It is another thing to say that, in respect of a matter which is beyond the scope of the contract, a tortious duty of care may not arise from the relationship between the parties. 9 In Australia, there have been several cases where a duty of care has been imposed upon solicitors notwithstanding that the solicitor's retainer did not impose that duty. (See Hawkins v Clayton; Hill v Van Erp (1997) 188 CLR 159; and Waimond Pty Ltd v Byrne.) 10 In the present case, I am content to assume that the respondents ("the solicitors") had no contractual obligation to take any further action to pursue the appellants' cause of action. The appellants had not contacted them after the reassignment of the cause of action and had not undertaken financial responsibility for the institution of proceedings. However, that is not to say that the solicitors had no duties in relation to the appellants. The solicitors were aware that the cause of action had been reassigned to the appellants. They were the bailees of the appellants' cause of action, insofar as that cause of action consisted of legal papers. They were aware that the documents remained with them because they were the solicitors who had handled the matter. They were aware, moreover, that the cause of action which their file represented would become valueless with the passing of the six year limitation period. 11 In the circumstances, there was a sufficient relationship of proximity between the appellants and the solicitors and a sufficient foreseeability of loss to the appellants should the solicitors fail to act to cast upon them a duty of care to warn the appellants that, if they did not institute proceedings prior to the expiry of the limitation period, their cause of action would be lost. A significant factor is the vulnerability of the appellants. The limitation period was not a matter of general knowledge but of legal knowledge. The solicitors must have been well aware that, if they did not bring the limitation period to the appellants' notice, the appellants could suffer harm through ignorance. The solicitors, who had handled the case on the appellants' behalf and who still held the file, were in a position to guard the appellants against the loss to which they were vulnerable. 12 I need not discuss the theoretical basis for the imposition of a duty of care in such a case. The principles upon which a court should act in imposing a duty of care in a case where a negligent act or omission may cause economic harm to another were discussed in detail in Perre v Apand Pty Ltd (1999) 73 ALJR 1190. I have been guided by the judgments of Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ in that case. 13 It is not in dispute that, if the solicitors had held an active retainer from the appellants, they would have been obliged to institute proceedings on behalf of the appellants within the limitation period or to warn the appellants of the consequences of allowing the limitation period to pass. It is not in dispute that, in considering duties of care arising under tort and contract, courts have imposed upon professional practitioners a duty to give an appropriate warning in respect of matters of which the client should be informed (see Rogers v Whitaker (1992) 175 CLR 479; and Chappel v Hart (1998) 72 ALJR 1344). 14 In the circumstances of the present case, I am satisfied that the solicitors had a duty to warn the appellants that, if they did not institute proceedings within the limitation period, their cause of action would become unenforceable. The judgment below should be set aside and there should be a declaration accordingly. 15 Fitzgerald AJA: On 4 July 1984 the appellants (the clients) purchased a truck from Mercedes Benz (Australia) Pty Limited. The clients were dissatisfied with the operation of the truck. On or about 23April 1986, they consulted the respondents (the solicitors). All discussions and communications took place between one of the clients, Alan Harold Curnuck, and one of the solicitors, John Hayden Williams. 16 On 23 April 1986, Mr Williams wrote to Mr Curnuck providing preliminary legal advice and requesting further information. It is common ground that, as pleaded by the clients, an oral agreement was made at about that time between the clients and the solicitors whereby the clients retained the solicitors to advise in relation to a possible claim for damages for breach of contract against the vendor of the truck. Indeed, the solicitors' written submissions assert that their "retainer to advise [was] expanded so that [they] were retained to institute and maintain proceedings against Mercedes upon the [clients] providing the [solicitors] with sufficient instructions, as to the proposed Defendants' breaches, and as to the losses suffered by the [clients] as a result thereof, to permit proceedings to be commenced and maintained." 17 The solicitors did not commence proceedings on behalf of the clients against the vendor of the truck within the period permitted by the Limitation Act 1969. Further, they did not advise the clients that the cause of action against the vendor of the truck would become statute-barred if proceedings were not commenced prior to the expiration of that period. 18 The clients sued the solicitors for damages for breach of contract and negligence in the District Court at Parramatta. Their action was dismissed with costs on 12 May 2000. This appeal is brought by the clients from that judgment. 19 Mr Williams died prior to trial, and Mr Alan Curnuck was the only witness. His evidence was rejected by the trial judge. However, there is a considerable body of reliable documentary evidence. 20 By letter dated 18 July 1986, Mr I Harrison, the barrister retained by the solicitors on behalf of the clients, forwarded the solicitors a draft Statement of Claim which was complete except for "Particulars of the faults and defects complained of… set forth in the Schedule annexed hereto and marked 'A'" and "Particulars of the Plaintiff's loss and damage… set forth in the Schedule annexed hereto and marked with the letter 'B'." In his letter, counsel said: - "Y ou will.. have observed that I have not completed the Schedules to which the document refers. First, I should prefer to have the Plaintiffs or one of them prepare a document which sets out in detail the faults and defects with the truck which the Plaintiffs have experienced. Some of the defects and the faults referred to in the handwritten statement with which I am briefed are expressed colloquially and in any event I do not pretend to be sufficiently familiar with the mechanical specifications of the truck concerned to be confident in the compiling of a list of the subject particulars… Secondly, I am not briefed with any details of loss and damage upon the basis of which I could settle particulars for inclusion in the Schedule "B". The preparation of these particulars will no doubt prove to be a long and difficult task but one which is crucial to the success of the proceedings should they be instituted. 21 Mr Harrison's letter also referred to the possibility raised by the solicitors that the clients might seek to sue the vendor of the truck for damages for misrepresentation and said: - " Whether or not such a cause of action is available to the Plaintiffs will depend upon obtaining further information from them. If the only representation of which the Plaintiffs complain is that the truck was to be sold with a new truck warranty when in fact the Defendant has complied with obligations imposed upon it only in accordance with the terms of its used truck warranty, then a claim in deceit would not appear to be appropriate. It may be the position that the Plaintiffs have a cause of action under certain Sections of the Trade Practices Act, 1974. In order to institute proceedings for relief under that Act the Plaintiffs will have to commence in the Federal Court of Australia. I should be pleased in due course to have your comments upon the commencement of proceedings in that jurisdiction. Obviously the litigation would take a different course if that procedure were adopted…" 22 On 29 July 1986, the solicitors wrote to the clients in the following terms: - " Re: Mercedes Benz In order that we might have the Statement of Claim issued in this matter we would appreciate if, as soon as possible, you would commit to writing the following:- 1. Full details and particulars of all defects complained of in relation to the relevant vehicle; 2 The total schedule of all your actual losses to date. We look forward to your early submission of the document. …"

23 The position which had been reached by 1 April 1987 appears from Mr Harrison's letter of that date to the solicitors, which provided: - " CURNUCK & ORS v MERCEDES BENZ (AUSTRALIA) PTY LIMITED. I enclose Schedule "A" for annexure to the draft Ordinary Statement of Claim originally prepared by me. I have not been furnished with any information upon the basis of which the proposed schedule 'B' could be prepared and accordingly I have deleted reference to that Schedule where it appears under the heading 'Particulars' in paragraph 9 to the draft Statement of Claim. This, of course, only postpones the problem and at some time an expert (preferably the Plaintiff's accountant) will have in detail to turn some attention to the question of quantification of the loss. I note in passing that this issue will no doubt to some extent be complicated by the fact that the truck was involved in a motor vehicle accident causing substantial damage on 27 March, 1986."

24 After the alteration made by counsel, the draft statement of claim included the following "particulars" in relation to damages: - " Particulars of the Plaintiffs'' loss and damage exceed three folios and full details of such loss and damage will be furnished under cover of letter in due course." 25 On 3 April 1987, the solicitors wrote the following letter to the clients: - " Re: Mercedes Benz Australia Pty Limited We enclose herewith a photostat copy of the Statement of Claim which we intend to issue in this matter and a photostat copy of the faults and defects which we would appreciate if you check together with the Statement of Claim to make certain that the same is in line with your instructions given to us. [Underlining added]. As you will see by perusal of the Statement of Claim it is necessary for us to provide the defendant with the loss and damage which has flowed to you as a result of the vehicle being unable to carry out its commitments to you. We would suggest that as there is a considerable amount of money involved you should immediately make an appointment with your accountants and get down to the nitty gritties of formulating what the actual loss is. … We look forward in your own interests to having the relevant particulars as soon as is possible."

26 On 1 July 1987, Mr Harrison again wrote to the solicitors in the following terms: - "RE: CURNUCK V. MERCEDES BENZ (NSW) PTY LIMITED I refer to your recent correspondence seeking advice in this matter. I am not certain I understand what it is that there remains to be provided by me. I note that the statement of claim and further particulars prepared by me would enable you to commence the proceedings. . In the circumstances, whilst my brief contains certain original material, I have taken the liberty of returning the brief to you. Should there be any outstanding matters which require attention you might care to contact me by telephone in order that no delays might be occasioned."

27 On 7 July 1987 the solicitors wrote the following letter to the clients: - " Re: Mercedes Benz. We enclose herewith photostat copies of all handwritten matter held by Mr. Harrison of Counsel. We would appreciate having your instructions as soon as possible."

28 The clients experienced financial difficulties. On 29 July 1987, the solicitors wrote to a firm of accountants, Messrs Gagie and Jones. The solicitors' letter, which referred to a number of disputes involving the clients, provided as follows: - "Re: Curnuck and Curnuck Bros. We understand that a meeting pursuant to part 10 is to be held in relation to the abovenamed at the Riverine Club Wagga Wagga on the 24th August next. We would advise that we presently hold instructions to endeavour to recover a considerable sum of money from Mercedes Benz (Australia) Pty. Ltd. The proposed action arises out of a sale by that company to our clients of an expensive Mercedes Benz Commercial Vehicle which was according to our instructions, sold with a "new vehicle" warranty. We have had considerable difficulty in obtaining the appropriate evidence as to exact loss but recently have been supplied with information which makes the task in that regard somewhat easier. There can be no certainty whatsoever that the action would be successful and we believe that this is a matter which should be canvassed with the Creditors. Mr A. Curnuck has had a conference with Mr. Ian Harrison of Counsel who has a brief in the matter. … Having regard to the now circumstances of the matter we will take no further steps in any of these matters until such time as we have your advice."

29 On 10 August 1987, the clients agreed at a meeting of the creditors under Part X of the Bankruptcy Act 1966 (Commonwealth) to enter into a Deed of Arrangement appointing Mr Gagie as Trustee. 30 On 27 August, the solicitors wrote to Messrs Gagie and Jones in relation to the clients' complaint against the vendor of the truck and another matter. That letter provided: - " Re: Curnuck Bros re: ..2. Mercedes Benz Aust Pty. Ltd. … The other matter relating to Mercedes Benz is one with some more merit. We would suggest that a firm opinion should be taken from Mr. Ian Harrison of Counsel with whom we previously discussed this matter and who is currently considering certain aspects of it. For a cost of $150.00 to $200.00 we believe an opinion should be obtained from him in relation to the merits of the matter and to consider whether he believes that it is in the interests of the creditors for the matter to pursue. If you would wish us to obtain that opinion, we would appreciate having your instructions." 31 On 31 August 1987 Messrs Gagie and Jones instructed the solicitors to obtain an opinion from counsel "regarding the merits of pursuing the matter relating to Mercedes Benz". 32 On 3 September 1987 Mr Harrison wrote to the solicitors in the following terms: - "KURNUCK and MERCEDES BENZ. I refer to the above matter. I note that I have previously prepared and forwarded to you a draft Statement of Claim for commencement of proceedings in the District Court of New South Wales. Having considered the material upon the basis of which that document was prepared I am of the view that the Plaintiff has reasonable prospects of succeeding in the matter. I am unable with any accuracy to determine what is the likely or probable quantum of the Plaintiff's loss, however, and you will recall that that portion of the Statement of Claim referring to or containing particulars of loss remains yet to be completed following instructions from your clients." 33 The clients executed the Deed of Arrangement of 10 September 1987. Clause 5(b) of the deed provided: - " 5. The [clients] convey and assign to the Trustee all their interest in the following contingent assets: - … (b) Claim against Mercedes Benz (in the sum of $184,000.00); … UPON TRUST To deal with the same in accordance with Part X of [ The Bankruptcy] Act for the benefit of the creditors of the [clients] and as to any surplus after paying in full the several debts and liabilities of the [clients] proved under this Deed together with the costs, charges and expenses of and incidental to the execution of the trusts of this Deed (including the remuneration and expenses of the trust Deed) UPON TRUST for the [clients]…" 34 On 15 September 1987, the solicitors wrote to Messrs Gagie and Jones as follows: - "RE: Curnuck and re Mercedes Benz. We enclose herewith a photostat copy of Mr. Harrison's letter of the 3rd inst which is self explanatory. We would appreciate having your advice as to whether we are to proceed with the matter. We are seeking the further particulars from Mr. Allan Curnuck."

35 On the same day, the solicitors wrote to the clients in the following terms: - " Re: Mercedes Benz. Because of the insolvency we require the written instruction of the Trustee before this matter can be proceeded further with. Herewith we enclose a copy of schedule "A" which sets out all the defects of the vehicle as previously instructed by you. We also enclose other documents which may be of assistance to you. What is now required, as in the ultimate it will be necessary for you to give evidence as to the same, is for the exact cost of the various repairs to be set out and to have the names and addresses of the persons to whom such repair costs were paid. We would also appreciate if for the same purpose, you would commit to writing exactly what you believe your loss to be upon the basis of say two trips per week or whatever, less running costs, labour and fuel and depreciation and any other damage whatsoever that you can quantify. We would appreciate if you would let us have this as soon as possible.

36 On 7 October 1987, Messrs Gagie and Jones wrote to the solicitors requesting a copy of the draft statement of claim and stating that the Trustee was "..considering the appropriate line of action to follow" and that the solicitors would be advised in due course. 37 The solicitors forwarded a copy of the statement of claim to Messrs Gagie and Jones on 12 October 1987. 38 On 5 November 1987, Messrs Gagie and Jones wrote to the solicitors requesting Mr Williams to attend a proposed meeting of the Committee of Inspection to be held on 20 November 1987 to "..offer.. advice as to the merits of proceeding ..in the clients' claim against the vendor of the truck…, to outline to the committee the steps involved in continuing with legal action" and to provide "a summary of the costs, time and procedure involved in pursuing legal action…" 39 On the same date, Messrs Gagie and Jones wrote another letter to Mr Williams "as a member of the Committee of Inspection" informing him of developments. 40 On 6 November 1987, the solicitors wrote to Messrs Gagie and Jones as follows: - " Re: Curnuck Bros re Mercedes Benz Australia. If this action were to be maintained we believe that it could be commenced in the District Court where the present delay in Wagga is in the order of 18 months from the date of commencement of the action. As you are aware Mr. Harrison of Counsel has indicated that subject to the Plaintiff's evidence being accepted by the tribunal an action is maintainable. The key to the matter is whether the court would be satisfied on the balance of probabilities that in fact as a condition of the purchase the proposed defendant company gave 'a new vehicle warranty'. Here again the evidence in relation to the transaction is almost entirely that of Mr. Allan Curnuck in relation to whose status as a witness we have previously averted. Unlike the Barclay Mowlem matter, one could be excused for thinking that this company may be prone to settle the matter rather than to have the publicity of an action of that nature contemplated by the Messrs. Curnuck. Again because of virtual total lack of records and inability to pinpoint contractual losses, proving the quantum of the claim may present serious difficulties. Again your Committee should consider the question of costs. We believe that it is a matter which to be properly prepared would take 1 1/2 to 2 days. If the action was so far as the Plaintiff is concerned, unsuccessful, costs involved could be $12,000.00 to $15,000.00. We would appreciate if following our meeting with the Committee we could have your further instructions."

41 At a meeting of the committee of inspection on 20 November 1987, at which Mr Williams was not present according to the minutes, correspondence from him relating to the clients' claims was tabled. It was resolved: "That the Trustee assign to Messrs A., I. & M. Curnuck all his rights and interests in relation to the subject legal action against Mercedes Benz Australia…on the basis that the assignees agree that in the event of a successful action, one-half (1/2) of the proceeds, after deducting relevant legal costs, be paid to the Trustee for the benefit of creditors." 42 On 23 November 1987 Messrs Gagie and Jones wrote to the solicitors requesting them to "draw up an appropriate Deed of Conditional Assignment in order to effect the wishes of the Committee of Inspection." 43 The solicitors forwarded a draft document by letter dated 26 November 1987 to Messrs Gagie and Jones. 44 By a Deed which was dated 23 February 1988 in the form of the draft prepared by the solicitors, the Trustee assigned "..all .. his rights in the choses in action" referred to in the deed, including that against the vendor of the truck, to the clients, who agreed that in the event of their action being successful and monies being recovered by them they would repay to the trustee "one half of all monies received by judgment or settlement, less any costs and disbursements incurred in the maintenance and prosecution of the said action". 45 Subsequently, the solicitors received the following letter dated 23 March 1988 from Messrs Gagie and Jones (then Gagie, Jones and Sistrom): "Re: Insolvent Estate of M., A. H. & I. J. Curnuck - Debtors I refer to the draft Deed of Assignment document prepared by yourself in relation to the above matter and advise that this has now been completed. I take this opportunity to thank you for your assistance in this matter and look forward to receiving your Fee Account."

46 Neither the clients or the solicitors took any further steps before the limitation period expired more than two years later. 47 Mr Alan Curnuck finally contacted Mr Williams on 20 September 1990. Later that day, Mr Williams wrote to him in the following terms: - " Re: Mercedes Benz Australia Pty Ltd We refer to our conversation of even date. As you would appreciate a lengthy period of time has expired but it is the writer's hazy recollection that he was advised verbally by Messrs. Gagie and Jones that the committee was not mindful to fund the action. As a result, we have had no further instructions in relation to the matter and of course, have had no contact whatsoever with you until this day." 48 Mr Williams wrote another letter to the clients on 26 September 1990 in which he stated: - " RE: YOU & OTHERS RE MERCEDES BENZ We refer to our two conversations in relation to this matter. It is, in the first instance, noted that the figures and calculations required to complete Schedule B of the proposed Statement of Claim, as sought in our letters of the 29th July, 1986, the 3rd April, 1987, 7th July, 1987 and the 15th September, 1987 have not been provided by you or your accountants. As pointed out to you, both by Counsel and the writer on more than one occasion, the matter cannot properly be brought before the Court until those figures are prepared and verified in as much details as is possible. Bearing in mind the fact that you are so far away and time is of the essence, we are of the opinion that it probably would be in your interests to have the matter prepared by Solicitors closer to you. There are, of course, as you are well aware, some problems in relation to the question of whether the action is statute barred. The Hire Purchase Agreement, through which you acquired the vehicle bears date the 24th July, 1984. If that were the be all and end all date then, quite clearly, you would be statute barred. The situation however is, as we see it, that it was not until sometime about the 4th July, 1985 that the real problem became apparent and it became apparent to you that the vehicle was not ever going to be right. We would look to having your confirmation that at about that time, you took up the question of the company's liability with it and, that when you gave us instructions on the 23rd April, 1986, the matter was still the question of negotiation between you and the company. If that be the situation, then we believe that the starting point might well be the date upon which the negotiation were entered into. If you could ascertain that and advise us, we could finally give you our opinion. Again, we point out that speed on your part is necessary, and again we point out that the mathematical calculation either by you or your accountants must be in order before the appropriate Statement of Claim can issue. We would appreciate if you could consider all matters and we look forward to having your advice as soon as possible." 49 It is common ground that the limitation period applicable to an action by the clients against the vendor of the truck had expired prior to September 1990. 50 Apart from his rejection of Mr Alan Curnuck's evidence, the principal findings made by the trial judge were: - (a) ". .even if, as was alleged by Mr Kurnuck, one accepted that he never told Mr Kurnuck about the time limit and what it was, and to be able to commence proceedings, the fact that the time limit was not explained, was not, in my view, any cause of the loss that the [clients] suffered because this was a loss which [they] brought upon himself by the total failure to take the necessary action to ensure that proceedings could be commenced on [their] behalf." (b) " … There is no doubt that [Mr Curnuck] went back to see Mr Williams. The question is what in fact occurred at that stage? Some indication of this may be gleaned from the documents which were tendered by the [solicitors] setting out the correspondence of the parties at that time. I have reached the conclusion that there was no resurrection of instructions after the Trustee in Bankrupt (sic) relinquished his entitlement to take the proceedings again (sic) Mr Williams. But Mr Williams may at some stage have been quite prepared to have a look at the case again, provided he got some information. It is possible, but I find that he received no further instructions, and that he had no continuing obligations after the Trustee in Bankruptcy took over, and at the time when the [clients] had [their] rights restored to [them]. I find that [Mr Curnuck] never instructed Mr Williams to commence proceedings or provided him with any information which would enable him to do so after the Trustee in Bankruptcy's action, just as he had not provided that information to Mr Williams before the Trustee in Bankruptcy took over." (c) (i) "[Mr Alan Curnuck] knew from his own knowledge that there was such a limitation period ", and

(ii) " [Mr Alan Curnuck] well knew about this time limit, and a failure to advise him about the time limit was not in any way a cause of any loss that the [clients] suffered." 51 The trial judge did not expressly find whether or not the clients were aware that proceedings had not been issued at the time when the limitation period expired. However, it seems implicit in his judgment, including his rejection of Mr Alan Curnuck's evidence that Mr Williams incorrectly informed him that he had issued a statement of claim, that the clients failed to establish to his Honour's satisfaction that they were unaware that proceedings had not been issued until after the limitation period expired. 52 Despite the disadvantages commonly associated with such a course and over the solicitors' objection, the trial judge ordered that "liability be decided before damages". One difficulty created by that decision, which does not seem to have been formalised, is that it leaves uncertain what issues were intended to be tried. In Morgan v Tame (2000) 49 NSWLR 21, Spigelman CJ, with whom Handley JA agreed, identified five "analytically distinct elements of the tort of negligence - forseeability, 'proximity', breach, causation and damage". Although the tort of negligence is not complete until a breach has caused loss, causation is generally considered to be an aspect of "damages", not "liability", in both tort and contract claims. It is therefore reasonable to assume that, as a result of the ruling that "liability be decided before damages", issues relating to damages, including the issue of causation, were not fully investigated. Nonetheless, his Honour made findings concerning the clients' knowledge in dealing with causation. While some of those findings might also have been material to the issue of the clients' contributory negligence which had been pleaded by the solicitors, contributory negligence is not discussed in the judgment. In the circumstances the only issue which can be satisfactorily resolved in this Court is whether the solicitors breached their duty to the clients. That issue must be decided on the basis that, if the clients had potentially material knowledge, there is no evidence or finding that the solicitors were aware of what the clients knew. 53 The solicitors were advised by counsel by his letter of 1 July 1987 that they were in a position to institute proceedings against the vendor of the truck by using the statement of claim and particulars which he had prepared. There is nothing to indicate that the solicitors disagreed with that advice or that it was incorrect. Earlier, on 3 April 1987, the solicitors had provided the clients with a copy of the statement of claim, which, they informed the clients, they intended to issue. 54 Shortly after they received counsel's letter of 1 July 1987 (at the latest), the solicitors became aware that the clients proposed to sign a Deed of Arrangement. Some months later, in March 1998, the solicitors became aware that the cause of action against the vendor of the truck which the clients had assigned to their Trustee by the Deed of Arrangement had been reassigned to them by the Trustee. There is nothing to indicate that the solicitors did not then still have the clients' file, that they had rendered their account or that their costs had been paid. 55 There was no material breach of duty by the solicitors up to that time. More than 2 years remained within which the clients' proceeding against the vendor of the truck could be commenced. 56 Conversely, subject to an argument by the solicitors which is discussed below, when the clients' claim against the vendor of the truck was reassigned to the clients to the knowledge of the solicitors, they had a duty either to commence proceedings on behalf of the clients against the vendor of the truck within the limitation period or, if they were unwilling to act for the clients, to inform the clients of their decision and to advise them of the limitation period. 57 However, the solicitors submitted that their duty to the clients under the law of tort was co-extensive with their contractual obligation to the clients under their retainer from the clients and that they had no duty to the clients, in contract or under the law of tort, to give advice other than that which they were retained to give: Heydon v NRMA (2000) 36 ACSR 462, [147], [148], [309], [364], [365] and [678]. While the solicitors did not submit that advice in relation to the Limitation Act was outside the scope of their retainer while it subsisted, they argued that their retainer was terminated and their contractual obligations to the clients (including their contractual obligation to give advice) ceased when the clients executed the Deed of Arrangement. Because their duty to the clients under the law of tort was no more extensive than their contractual obligations to the clients and their contractual obligations had terminated when the clients signed the Deed of Arrangement, the solicitors had no duty to the clients under the law of tort after the clients' claim against the vendor of the truck was reassigned to them. 58 Even if the solicitors' duty to the clients under the law of tort was no broader than their contractual obligations while their retainer subsisted, it would not follow that the solicitors had no duty to the clients under the law of tort after their contract terminated. As Hill v Van Erp (1997) 188 CLR 159 exemplifies, a solicitor can have a duty under the law of tort to a person who is not a client. The applicable legal principle is succinctly stated in the following passage in the majority judgment in Astley Ltd v Austrust Ltd (1999) 197 CLR 1 at [48]: - " The evolution of the law of negligence has broadened the responsibility of professional persons and requires them to take reasonable care and skill even in situations where a contractual relationship cannot be established." 59 Not surprisingly, it was not submitted by the solicitors that the clients were disentitled to any protection which the law of tort would have otherwise provided because they had previously been clients of the solicitors. On the contrary, the relationship of solicitor and client which had existed and, on the solicitors' argument, had terminated, was one of the circumstances to be considered in determining whether the solicitors owed a duty to the clients after their claim against the vendor of the truck was reassigned to them. These circumstances, including the forseeability of damages to the clients if the limitation period expired without the institution of proceedings against the vendor of the truck, require a conclusion that, after the cause of action against the vendor of the truck was reassigned to the clients, the solicitors had a duty to the clients under the law of tort notwithstanding the clients' earlier signature of the Deed of Arrangement. The solicitors breached that duty by their failure to notify the clients of their decision not to act on the clients' behalf in relation to their cause of action against the vendor of the truck (if the solicitors ever made such a decision) or to warn the clients of the limitation period. 60 Since contributory negligence by the clients would be material if the solicitors breached only their duty to the clients under the law of tort and not a contractual obligation which they owed to the clients (Astley Ltd v Austrust Ltd (1999) 197 CLR 1), it is necessary to consider whether the solicitors also breached a contractual obligation to the client. 61 The clients' signature of the Deed of Arrangement to the knowledge and with the cooperation of the solicitors withdrew the clients' instructions to the solicitors to issue proceedings against the vendor of the truck on behalf of the clients and ended the solicitors' authority to do so. However, even if the solicitors' instructions to commence proceedings on behalf of the clients were not reinstated when the solicitors were informed that the clients' cause of action against the vendor of the truck had been reassigned to them, the Deed of Arrangement had not terminated the relationship of solicitor and client between the solicitors and the clients, ended their contract, disentitled the solicitors to payment under the contract for services which they had rendered or released them from all further contractual obligations to the clients. 62 The solicitors' letters in September 1990 tend to confirm that their relationship with the clients continued after the clients signed the Deed of Arrangement. Mr Williams' "hazy recollection" in his first letter, dated 20 September 1980, was plainly incorrect. That is not surprising. There had been no contact with the clients from more than 2 years. His other letter, about a week later after he had time to reflect, did not suggest that he thought that the solicitors had ceased to act for the clients. On the contrary, although the statement of claim which counsel had prepared for the solicitors to institute proceedings on behalf of the clients against the owner of the truck no longer proposed that particulars be inserted in Schedule B, Mr Williams' letter of 26 September reverted to the clients' omission to provide details for inclusion in Schedule B as an explanation for the solicitors' inactivity. That letter also contained a suggestion that it might be prudent for the clients to engage another solicitor whose practice was located more conveniently to the clients, gave advice about the limitation period and offered a more considered opinion on that subject if additional information was provided. 63 The solicitors' submission that they had no contractual obligation to the clients after they executed the Deed of Arrangement should be rejected. The solicitors were obliged by their retainer to provide the clients with information and advice which was appropriate for a prudent finalisation of their relationship if that was to occur. The solicitors breached their contractual obligation to the clients by failing either to institute proceedings against the vendor of the truck or to give the clients appropriate advice before the limitation period expired. 64 The appeal should be allowed with costs and the judgment below should be set aside. It should be declared that the solicitors breached their contractual duty and their duty under the law of tort to the clients. The action should be remitted to the District Court for it to be determined whether the solicitors' breach caused the clients any loss. The costs of the District Court proceedings should be reserved to the judge who determines the issue of damages. In the circumstances, especially having regard to the trial judge's strongly critical findings made with respect to Mr Alan Curnuck's credit and his Honour's findings on issues which he should not have decided, the action should be continued before a different judge.

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Judgment (18 paragraphs)

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Cases Cited (8)