Edwards and Anor v Anderson and Ors [2009] NSWSC 373 | Case summary

Edwards and Anor v Anderson and Ors [2009] NSWSC 373 | Case summary | Zoe

JUDGMENT 1 HER HONOUR: These proceedings were commenced by Harry Joseph Augustus Edwards in April 2007. They were pursued by further amended statement of claim filed in Court on 15 April 2009 by David Harry Edwards and Judith Anne Gorry, Mr Edward's son and daughter and the executors and trustees of his will. 2 The claims concern advice given in 2001 to Mr Edwards by Mr Paul Anderson, one of the defendants, a partner of the firm TurksLegal. Mr Edwards and his wife then took a sublease of a unit in a retirement village known as Woolcott Court. The lessor was the operator of the village, Woolcott Village Pty Ltd ('Woolcott Village'). Mr and Mrs Edwards also entered into a residence contract with Woolcott Village. Woolcott Village had itself leased the unit from Sarana Holdings Pty Ltd ('Sarana'), after selling the unit to Sarana for $292,000 in 1999. The rent payable to Sarana under the head lease was $29,200 per annum. The rent payable by Mr and Mrs Edwards was $12 per year. They were required to make other payments under the residence contract for the provision of various services, which included meals, cleaning and laundry, as well as paying Woolcott Village an ingoing contribution payment of $272,000. 3 Mr and Mrs Edwards moved into unit 8 of Woolcott Village on 26 May 2001, after the residence contract was executed on 10 May. The sublease was not executed until June, after the sale of their former residence was completed. The defendants acted for Mr and Mrs Edwards on that transaction, as well as in relation to the residence contract and sublease. Under the residence contract Woolcott Village was obliged to repay the ingoing contribution payment made by Mr and Mrs Edwards, less certain deductions, as a departure fee when they gave up possession of the unit. After completion of the sale of their unit, Mr and Mrs Edwards made the ingoing contribution payment of $272,000 due under the residence contract to Woolcott Village on the basis of $252,000 in cash, with $20,000 to be deducted from the departure fee, due to be paid to Mr and Mrs Edwards by Woolcott Village when they gave up possession of the unit in the future. 4 There was an issue between the parties as to the legality of this aspect of the transaction, given the provisions of s 156 of the Retirement Villages Act 1999. The provisions of the Retirement Villages Act governed the residence contract, both by express provision in the contract and by virtue of s 199 of that Act, which precluded parties to such agreements contracting out of the statutory regime. 5 Unbeknownst to Mr and Mrs Edwards, in May 2001, shortly after entering the residence contract, an external controller was appointed to Woolcott Village. On 5 October 2001, an application under the Retirement Villages Act for the appointment of an administrator, was brought before the Court, on the application of the Director General of the Department of Fair Trading. In his decision in Director General Department of Fair Trading v Woolcott Village Pty Ltd [2001] NSWSC 889, Hamilton J referred at [1] to the Director General's affidavit, which described the situation at Woolcott Court as:

6 On 12 October 2001, a Mr Condon was appointed administrator. On 8 October, an application that Woolcott Village be wound up came on for hearing before the Court. It was dissolved in November 2005. Mr Condon operated the retirement village as administrator until 2007. During the administration, attempts to find another operator for the retirement village failed. 7 Mr and Mrs Edwards continued living in the unit at Woolcott Court until August 2005. The services formerly provided by Woolcott Village under the residence contract were not all maintained during that time, with the administrator and Mr and Mrs Edwards making various arrangements from time to time as to such services. In 2005, both Mr and Mrs Edwards had difficulty in continuing to cope at Woolcott Court, given their health and the absence of meals formerly provided to them under the residence contract. On 8 August 2005, they both left to go into respite care, while efforts were made to find them another residence. Mrs Gorry described the difficulty in finding such accommodation for them, they having no funds to make another ingoing contribution payment to another operator. Woolcott Village defaulted on the departure payment due to them when they left Woolcott Court. Sarana, the owner of the unit they had occupied, had no obligation to make such a payment to them, nor did anyone else. They did not have any right even to assign their sublease. On the evidence of the two experts, Mr Bevan and Mr Manning, this was an unusual arrangement, later described by the administrator of the retirement village, Mr Gordon, as 'unique', and giving rise to difficulties when attempts were made to find another operator of the village. 8 Accommodation was finally found for Mr and Mrs Edwards, at a higher level of care than that which they had received at Woolcott Court, necessary because of their health at that stage, although in Mrs Gorry's opinion, if meals had continued to be provided at Woolcott Court, her father might have been able to remain there for another six months. Mr and Mrs Edwards moved to Bowden Brae retirement village in October 2005, where the ingoing contribution payment was waived by the operator, the Uniting Church, after representations were made on their behalf. 9 In July 2007 the administrator was removed, in accordance with provisions of the Retirement Villages Act, again on application of the Department of Fair Trading. Residents were then advised by the administrator that Woolcott Court would no longer operate as a retirement village; that the Residential Tenancies Act 1987 would in future apply to their leases and that they should seek legal advice. The last of Mr and Mrs Edwards' property had been removed from the unit in March 2007, when the keys were handed to the then owner of the unit (which had acquired the property from Sarana as part of the settlement of certain family law proceedings).

The adjournment applications 10 On 14 April 2009, an application to vacate the hearing fixed to commence on 15 April was refused by Hoeben J, but leave to proceed on a further amended statement of claim in the form annexed to the plaintiffs' motion of 9 April was granted, that application not being opposed. 11 The application to vacate the hearing arose from a proposed further amended defence, which the defendants had served on 1 April 2009, which raised s 129 of the Retirement Villages Act 1999 as a defence. This, it was claimed for the plaintiffs, if pressed, would necessitate an adjournment of the hearing, because the plaintiffs were not in a position to meet the evidentiary case which it raised. 12 Hoeben J was not convinced that such an adjournment was necessary, but made it clear that his refusal of the application did not preclude the plaintiffs from renewing the adjournment application at the hearing. His Honour reserved the question of costs. That application was pressed again at the commencement of the hearing, the plaintiffs' case being that they objected to the further amended defence to the further amended statement of claim, if the s 129 point was pressed. If leave to proceed on that defence was granted, an adjournment of the hearing was pressed, so that an investigation into relevant underlying facts could be pursued. 13 Having heard the parties as to what the s 129 defence raised, I came to the conclusion that the defendants had to be given leave to proceed on the further amended defence and that the adjournment application had to be declined. Like Hoeben J, it appeared to me that there was no proper foundation for the suggested difficulty with the factual foundation for any argument in relation to s 129. That followed from what was not in issue between the parties, what the evidence which they each proposed to lead showed and that the real issues raised by the s 129 defence were questions of construction of that and other provisions of the Retirement Villages Act. The defendants pressed for an order for costs in relation to the two adjournment applications, which I declined to deal with at that stage. 14 The arguments about s 129 of the Retirement Villages Act which the parties had advanced at the commencement of the hearing, largely fell away as matters important to a determination of what was here truly in issue. Section 129 provides:

(1) A residence right arising from a contract relating to residential premises that are owned by the resident terminates only on the completion of the sale of the premises. (1A) A residence right arising from a residence contract that is in the form of an assignable lease terminates on the assignment of the lease. (2) A residence contract relating to premises other than premises owned by the resident or premises that are subject to an assignable lease (and the residence right under the contract) terminates: (a) on the date on which the resident delivers up vacant possession of the residential premises to the operator, being a date that is (except as otherwise provided under this Part) at least one month after the date on which the resident gives the operator written notice of intention to vacate the premises (or such earlier date as the residence contract may allow), or (b) on the date on which the resident delivers up vacant possession of the residential premises, with the prior consent of the operator, to the operator, or (c) on the date on which the resident delivers up vacant possession of the residential premises to the operator after receiving notice of the operator's intention to apply to the Tribunal for an order terminating the resident's residence contract, or (d) on disclaimer (for example, on renunciation by the resident accepted by the operator), or (e) on the death of the last surviving resident under the contract, or (f) on the date specified by the Tribunal in an order under section 143 declaring that the resident has abandoned the premises, or (g) on the date on which the contract is terminated by the Tribunal, or (h) if the contract is frustrated: (i) on eighth day after the date specified in the notice of termination given under section 132, unless application is made to the Tribunal within the time allowed by that section (or the notice of termination is withdrawn within that time), or (ii) on the date specified by the Tribunal, if the Tribunal determines that the contract is frustrated. (3) Termination of a residence contract does not affect any other right or obligation of the parties under a village contract.

22 Mr Bevan's view of the duty here in question departed considerably from that frequently discussed in the authorities, namely a duty to exercise reasonable care and skill in the provision of professional advice (see Heydon v NRMA Ltd (2000) 51 NSWLR 1 at 146 for instance). Given that his evidence was expressed in the context of a different and higher duty, namely the duty to ensure that Mr and Mrs Edwards' interests were totally secured and protected from any loss; that his opinions were relevant to what here fell to be decided, was difficult to see. Even if that difficulty were not insuperable, as to which see Midland Bank Trust Co Ltd v Hett Stubbs & Kemp (A firm) [1979] Ch 384 at 402, what also had to be considered was that in the disputed parts of his affidavit, Mr Bevan did not give any opinions as to the general practice of solicitors in the circumstances with which these proceedings were concerned. (See Austin J's discussion in Australian Securities and Investment Commission v Vines [2003] NSWSC 1095 at [20]). Nor was his evidence directed to the practice of competent or careful solicitors in advising in such circumstances, (see Vines at [21]); or what a reasonably competent or careful solicitor would or should do in the specifically defined circumstances of this case (see Vines at [22] - [26]); or even what industry wide practice or common practice amongst solicitors of good repute was (as discussed by Young J in Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 at 738). 23 Instead, the evidence sought to be given by Mr Bevan was an opinion that the defendants were negligent in doing and failing to do certain things, evidence which is not admissible on Young J's approach in Boulton, because 'This is the question for the court to decide'. Nor on his Honour's approach could Mr Bevan give evidence of what he himself would have done, if the purpose of adducing that evidence was to lead to the inference that all good solicitors would have done things that way. Austin J took a similar view in Vines at [31] - [32]. 24 As to expert evidence about the 'ultimate issue', Austin J observed in Vines:

25 Here, there could be no question that the evidence sought to be led from Mr Bevan suffered from the difficulty considered in Dean-Willcocks. Mr Bevan's opinions as to the deficiencies of the transactions and the advice given about them, was simply the type of submission which might be made by counsel for the plaintiffs. It did not go to establish what competent or careful solicitors might do in the circumstances here before the Court. 26 Mr Bevan went on to give certain oral evidence as to common practice in relation to transactions such as this, which it is not necessary to refer to at this stage, but to which I will return. The defendants' duty of care 27 The evidence showed that Mr Anderson came to act for Mr and Mrs Edwards in early 2001, because Mrs Gorry was at that time working for the defendants as an employed solicitor. The terms of her employment precluded her from acting for her parents. Her area of expertise was workers' compensation law. She approached Mr Anderson, the partner at the firm practising in this area of law, explained that her parents were very elderly and in ill health and would not be able to come to see him. He agreed to act for Mr and Mrs Edwards in relation to their dealings with Woolcott Village and the sale of their unit at Hornsby. Mr Anderson was not called to give evidence, but it was not in dispute that he never spoke to either Mr or Mrs Edwards, but communicated with them through Mrs Gorry and by correspondence. 28 Mr and Mrs Edwards had decided to sell their home, a unit at Hornsby and to move into assisted living. With their children's help, they had investigated such accommodation and had selected Woolcott Court as their preferred choice. There were a number of other units in other retirement villages which were also suitable and available, but they preferred Woolcott Court. 29 There can be no question that Mr Anderson owed Mr and Mrs Edwards a duty to exercise reasonable care and skill in the provision of his professional advice as to the matters in relation to which he was retained. That duty was not diminished by the fact that Mrs Gorry was an employee of the defendants, or that the defendants agreed to reduce the fee they charged Mr and Mrs Edwards by 10%, on account of her position. I accept, as the defendants argued, that Mrs Gorry's role as her parents' agent would have had an impact on how Mr Anderson gave his advice to Mr and Mrs Edwards. As observed in Capebay Holdings Pty Ltd v Sands [2002] WASC 287 at [94]:

32 I turn then to consider what was known to Mr Anderson in 2001, when he advised Mr and Mrs Edwards about the residence contract and sublease they proposed to enter. 33 Woolcott Village, the operator of Woolcott Court was a private company, which had only a leasehold interest in the unit owned by Sarana. Mr Anderson had been provided with a copy of the head lease. It showed that rent payable to Sarana was $29,000 per annum. The rent due under the sublease was $12 per annum. What was proposed was that Mr and Mrs Edwards would only take a sublease from Woolcott Village, which they had no right to assign, but would pay Woolcott Village an ingoing contribution fee of $272,000. On its face this situation would have given rise to an obvious question as to whether or not Woolcott Village had assets sufficient to ensure that it could pay Mr and Mrs Edwards their departure fee, if they had to leave Woolcott Court and whether it could provide the services it had proposed to provide to them, while they resided there. 34 The question of the security of their ingoing contribution payment was thus an obvious issue to consider when advising Mr and Mrs Edwards about this transaction. This was all the more so, given the evidence that this arrangement was an unusual one. On the evidence, in this industry, in cases where the incoming residents were not themselves acquiring their unit by way of strata title, it was more usual to take a lease direct from an owner, then by way of sublease. In this case, Mr and Mrs Edwards were only entering a sublease, which they had no right themselves to assign. On the evidence, Mr Anderson gave Mr and Mrs Edwards no advice about the proposed structure and any risks which it gave rise to, nor did he give them any advice in relation to the security of their ingoing contribution fee. 35 It appears that these were matters Mr Anderson did not consider. Mr Anderson did not conduct any ASIC search in relation to Woolcott Village. Had he done so, he would have discovered that it had a share capital of only $100. That would have raised an obvious question as to its financial capacity. The evidence suggested that normal practice would be for a solicitor to conduct such a search, when acting for incoming residents. Whatever might be the practice, it seems to me obvious that a careful and prudent solicitor acting on a transaction such as this one, would certainly obtain such a search in relation to a private company such as Woolcott Village, given its role in the transaction as operator and lessor. Mr and Mrs Edwards plainly had to depend on its ability to pay them a departure fee in future, as well as its ability to provide the promised services while they resided at Woolcott Court. Some investigation of the company's capacity to meet its obligation was undoubtedly required. 36 Even without having conducted a search, Mr Anderson did have information which put him on notice that there were questions as to Woolcott Village's financial situation. Again, on the evidence, Mr Anderson gave no advice to Mr and Mrs Edwards about this information, or whether it should give rise to any concerns on their part. 37 The transactions about which Mr Anderson was advising, were regulated by the provisions of the Retirement Villages Act. It applied to Woolcott Village's operation of Woolcott Court and the contractual arrangements it proposed with Mr and Mrs Edwards. The legislation is concerned to ensure that persons such as they, receive the benefit of certain protections, commencing with the provision of various important information before any contracts are entered into. Section 18 of the Retirement Village Act provides: 18 Disclosure statement concerning village (1) The operator of a retirement village must provide a prospective resident (or a person acting on behalf of the prospective resident) with a disclosure statement in accordance with this section. (2) A disclosure statement is a written statement containing detailed information concerning the village. (3) The statement must: (a) be in the form prescribed by the regulations, and (b) contain the information required by that form, and (c) be signed and dated by the operator. (4) The operator of the retirement village must annex a copy of the statement (or the statement as amended in writing and endorsed with the consent of the other party to the village contract) to the first village contract that the other party enters into with the operator. Maximum penalty: 10 penalty units.

39 The statement provided by Woolcott Village, thus on its face, invited further enquiry. Despite the obvious deficiencies of the statement provided, Mr Anderson did not draw any problems which the statement disclosed to Mr and Mrs Edwards' attention, even through Mrs Gorry and did not advise them that any difficulties might exist. I am well satisfied that a consideration of this disclosure statement, provided inconsistently with the obligations imposed by s 18 of the Retirement Villages Act, should have put any reasonably careful and competent solicitor squarely on notice of the need to make further enquiries as to the financial position of Woolcott Village. 40 Under the scheme of this Act, persons who become occupants of retirement villages pay very substantial ingoing contribution fees to operators such as Woolcott Village. In the case of Mr and Mrs Edwards, what they paid essentially represented the bulk of their assets, flowing from the sale of their unit at Hornsby. 41 While the financial management of retirement villages and the conduct of operators generally, is closely regulated under the Retirement Villages Act, what is not regulated at all, is what operators may do with ingoing contribution payments received from residents when they take up residence. What is regulated is what must be paid as a departure fee, once residents leave. While the disclosure statement suggested on its face that some operators hold ingoing contribution payments in a trust account, that was not what Woolcott Village proposed. Again, this information also suggested a need to ascertain something about Woolcott Village's financial situation. 42 On the evidence, persons connected with operators in this industry do not as a matter of practise provide any guarantees to residents, as to repayment of departure fees. Such guarantees are not required by the Retirement Villages Act. As the defendants argued, an operator's ability to make a departure payment depends entirely on financial viability when the payment falls due. Consequently, as was also argued for the defendants, persons such as Mr and Mrs Edwards are always at risk of an operator not being in a position to pay the departure fee due, when they leave. This underpins the importance of the disclosures required by s 18 of the Act, as to the operator's financial position, to prospective residents before they enter into any contract with an operator. 43 It follows that if there is any doubt as to the financial viability of a particular operator, it will be important to make enquiries as to its situation before any moneys are paid over by a resident. That is the purpose of the disclosure statement, namely, to provide information as to the operator's financial position, so that potential residents can make informed decisions about paying over a substantial ingoing contribution payment, before they enter any agreements with the operator. 44 On the evidence, Mr Anderson was aware that Mr and Mrs Edwards were elderly, in ill health, and in need of services promised under the proposed residence contract. In order to obtain such services they had to pay a fee of $272,000 to Woolcott Village. He knew that they were depending on the sum flowing from the sale of their unit to finance this payment. 45 It was Mrs Gorry's evidence that she had not given any thought to Woolcott Village's ability to repay this sum to her parents, if they needed to leave Woolcott Court. She relied on Mr Anderson for advice. Had Mr Anderson given advice as to any difficulties with Woolcott Village's financial position, she would have advised her parents not to enter a contract with it. While that evidence seems a little surprising, given that Mrs Gorry was a practicing solicitor of some 10 years standing, it must be accepted. Mr Anderson did not raise this issue with Mrs Gorry and she did not think of it herself. No advice about such matters was given to Mr and Mrs Edwards. 46 It was the defendants' case that it was obvious from the disclosure statement provided that there was a question as to Woolcott Village's financial position, so obvious that there was no need for Mr Anderson to give any advice to Mr and Mrs Edwards as to the risk which they would incur if they entered into the proposed arrangements, or of the prudence of making further enquiries about Woolcott Village. I do not accept that submission. 47 While I accept that the disclosure document, on its face, made abundantly clear that there was a difficulty, I do not accept what was implicit in the defendants' argument, namely that Mr Anderson had no resulting duty to give any advice to Mr and Mrs Edwards as to the risks which they were taking if no further enquiries were made as to Woolcott Village's financial position. Mrs Gorry's role in the transaction can not have relieved the defendants of their duty in this way. It was not her duty to advise her parents about these risks. That was the defendants' duty. 48 The very failure of Woolcott Village to make the disclosures it was required to make by s 18 of the Retirement Villages Act, was a matter about which Mr Anderson ought to have given advice to Mr and Mrs Edwards. 49 The disclosure document was signed by two directors, Mr Dalrymple and Mr Godfrey, on 14 February 2001. It indicated that Woolcott Court was developed in 1991 by Woolcott Court Pty Ltd, but that the current operator was Woolcott Village, which had been operating the village since January 1999. In clause 7.1, it indicated that the village had a maintenance fund for long term maintenance of the village, but in relation to the balance in the fund for the last financial year, it was said that the fund was 'not yet established'. Given the requirements of the Retirement Villages Act in relation to capital maintenance and maintenance funds in Part 7, Division 3 of the Act, this obviously conflicting information should have raised some concerns in Mr Anderson's mind. 50 What clause 7 of the disclosure statement provided puts that conclusion beyond doubt. It provided:

53 It was Mr Bevan's evidence that an ASIC search of the company ought to have been undertaken; that was normal practice in transactions such as this. Given the unusual nature of the arrangement here proposed by Woolcott Village and what the disclosure statement revealed as to its failures to comply with the provisions of the Retirement Villages Act, particularly in relation to the provision of financial information to Mr and Mrs Edwards, it is entirely apparent that a reasonably competent and careful solicitor would have undertaken such a search in this case. It was not. 54 On the evidence, if the search had been obtained, what would have been disclosed was that a winding up application had been made in November 2000, which was dismissed in December 2000. As was submitted for the defendants, this would not have shown that Woolcott Village was insolvent, but would have confirmed that there was another basis for concern as to its financial position. At a time when it was in default of its obligation to provide audited accounts to residents, and to provide information as to its financial position to a prospective resident as to its operations in the previous three years, a creditor had sought to have the company wound up, albeit unsuccessfully. 55 At the very least, this difficulty should have been drawn to the attention of Mr and Mrs Edwards, so that they could consider whether they wished to make further enquiries, or to seek advice as to Woolcott Village's financial viability. I accept that was not what Mr Anderson had been retained to determine. Nevertheless, he did have a duty to draw to their attention the risks of the transactions they were considering embarking upon. They were not given such advice. Mrs Gorry did not think of these matters herself; that was not her obligation, it was Mr Anderson's. 56 Had such advice been given, further simple and obvious lines of enquiry could have been pursued. ASIC searches in relation to the two directors and the other companies with which they had been involved, would have revealed that Mr Godfrey and Mr Dalrymple were directors of other companies wound up in 1998, a circumstance which precluded them from being directly or indirectly involved in the management or control of Woolcott Village, pursuant to s 57 of the Retirement Villages Act. This would have been yet another good reason for Mr and Mrs Edwards reconsidering their decision to enter into the proposed lease and residential contract with Woolcott Village. 57 It is unnecessary to speculate as to what else might have been uncovered, had simple and available enquiries been pursued. It was Mrs Gorry's evidence that had Mr and Mrs Edwards been advised of these problems, they would not have entered the sublease and residence contract with Woolcott Village. Her father was a retired clergyman, careful with his money. Her parents were elderly, in ill health and of limited means. Essentially what they paid to Woolcott Village represented the bulk of their assets, on which they depended to live out their lives. They had investigated a number of retirement villages which were suitable and available before deciding on Woolcott Court, which they preferred. I am unable to accept the defendants' submission that this preference would have overborne any consideration that the operator, to whom they were proposing to give the bulk of their assets, was in breach of its various obligations under the Retirement Villages Act; had no obvious means of paying them a departure fee in future; had not provided audited accounts as required to residents; appeared to be facing some unexplained financial challenges and was being operated by two directors who simply ought not to have been involved, given what the Retirement Villages Act specified. It was Mrs Gorry's evidence that she would have advised them not to go to Woolcott Court. That was only commonsense. The evidence does not leave open the conclusion that they would have come to any different view, to the contrary, it suggests that they would have accepted that advice. 58 What is required of a solicitor when advising clients has often been described. In Fox v Everingham and Another (1983) 50 ALR 337, the Full Federal Court observed at 341 - 342:

The retainer given by the Foxes to the respondents obliged the respondents to act generally in the Foxes' interests in and about their entering into the contract and their taking of title to the property pursuant thereto. At the least that obligation required the respondents, either themselves or by an employee qualified to do so, to go through the contract with the Foxes and explain the salient points of it to them. In this way their principal rights and obligations under it would be explained as would the general course the matter might be expected to take. The respondents were also under an obligations to explain to the Foxes provisions of the contract which were in an unusual form and which might affect their interests as they were known by the respondents to be. In this respect we refer to Sykes v. Midland Bank Executor and Trustee Co. Limited (1971) 1 Q.B. 113 where the Court found a solicitor negligent because he had failed to draw his client's attention to a clause in an underlease which prohibited the use of the premises for other than specified purposes without the consent of the lessor. We refer also to Attard v. Samson (1966) 110 Sol. J. 249. The respondents were also under an obligation which required them to give attention, before the contract was signed by the Foxes , to the question of whether it, from their point of view, contained adequate provisions to protect them against a variety of contingencies which might reasonably have been foreseen as likely to arise if things did not go as expected. It does not appear whether the contract was drafted in the respondents' office, but it was proffered by them on behalf of the company. The Foxes were entitled to rely on the respondents to see to it that the contract was adequate to protect their interests. In cases such as the present a solicitor is paid not only for what he in fact does, but also for the responsibility he assumes in trying to protect clients from financial loss if things go wrong. It is easy enough to act for people if things go as they are expected to. But it is because the unexpected will sometimes happen that solicitors are rightly paid the fees which they command. The corollary of this proposition is that if they do not measure up to the standard which is required of them, they are liable for breach of the obligation which they owe to clients. The standard required of them is not an absolute one. In Simmons v. Pennington & Son (1955) 1 All E.R. 240, Hodson L.J. (as he was) approved what had been said by Harman J. (as he was) at first instance. Hodson L.J. said (p.245): "It is said that Harman J. misdirected himself on the matter, but I cannot accept that. What he said was: 'I do not think I need deal at any great length with the question of a solicitor's liability for negligence. It is the same as anybody else's liability. Having regard to the degree of skill held out to the public by solicitors, does the conduct of the solicitor fall short of the standard which the public has been led to expect of the solicitor?' I think that that direction was right and consistent with authority." See also Nocton v. Ashburton (Lord) (1914) A.C. 932 at p.956.

Foreseeability and Causation 62 I am also satisfied that the loss arising from Woolcott Village's failures, including the failure to pay the departure fee it owed Mr and Mrs Edwards in August 2005, was reasonably foreseeable and caused by the defendants' breach of their duty. 63 While the defendants advanced submissions in relation to s 129 of the Retirement Villages Act, they are not relevant to this issue. No one other than Woolcott Village had an obligation to make a departure fee payment to Mr and Mrs Edwards, when they left Woolcott Court. I am satisfied that had they been advised in 2001, as they ought to have been, they would not have entered these transactions with Woolcott Village, but would have moved into another of the suitable units available in other retirement villages. 64 The defendants relied on Mrs Gorry's evidence that the ingoing contribution fee at such other units ranged from $120,000 to $400,000, depending on the services and level of care provided and the fact that Mr and Mrs Edwards had selected Woolcott Court as the village which they preferred. Account must also be taken of Mrs Gorry's evidence that at the time there were units available in other villages, at a price which was suitable. Mr and Mrs Edwards required assistance; they had limited means; they depended on the proceeds of the sale of their former residence to fund payment of the required ingoing contribution payment and depended on its repayment as a departure fee in future, if they needed a higher level of care, to enable them to live out their lives in a suitable environment, given their advancing years and frail health. 65 I am satisfied that in 2001, they had available to them the opportunity to take other suitable, available accommodation which they had the funds to acquire. Had they done so, their loss would have been entirely avoided. Causation was established; their transactions with Woolcott Village and the losses which resulted are the direct result of the defendants' failure in 2001 to advise Mr and Mrs Edwards of the risks of the transactions, in breach of the duty owed to them. Damages 66 Given the breach of their duty to Mr and Mrs Edwards, it follows that the defendants are responsible for any loss which they suffered as the result of that breach. 67 I do not accept the plaintiffs' claim that the costs of the respite care incurred after 8 August 2005, when Mr and Mrs Edwards left Woolcott Village is such a loss. That they were then seeking a higher level of care given their then health, precludes that conclusion. Nor do I accept that the assessment of the damage suffered must commence with the figure of $272,000, as the plaintiffs argued. 68 In 2001, Mr and Mrs Edwards paid $252,000 in cash, with payment of the balance of the $272,000 ingoing contribution to be deducted from the departure fee when it was paid. The plaintiffs' case was that this arrangement involved a breach of the Retirement Villages Act, which does not permit such a deduction from a departure fee. That this is a correct characterisation of what was agreed is doubtful. The definition of 'ingoing contribution' in s 6 of the Act certainly contemplates that such a payment may be made by lump sum, or by instalment. There would seem to be nothing which would preclude such an instalment only becoming payable at the time of the departure fee, as Mr and Mrs Edwards agreed with Woolcott Village. Given their limited means, that delay was obviously to their advantage. 69 It ought not to be overlooked that Mr and Mrs Edwards lost $252,000, the sum paid in 2001 to Woolcott Village, not $272,000. The additional $20,000 of the purchase price still outstanding was never paid. As a matter of logic, if nothing else, a sum which was never paid to Woolcott Village by Mr and Mrs Edwards cannot be regarded as having been a loss which flowed from the defendants' failures. 70 Had the defendants advised Mr and Mrs Edwards in 2001 of what they should have paid by way of ingoing contribution fee, as the plaintiffs argued they ought to have done, Mr and Mrs Edwards would have had to pay a further $20,000, thereby suffering a $20,000 higher loss, when Woolcott Village failed to pay the departure fee it owed them. That, however, is not what happened. All that was paid and lost was $252,000 and accordingly, the calculation of damages must have regard to that sum. 71 Otherwise, the defendants also argued that in assessing damages attention had to be paid to the fact that there was no evidence as to what Mr and Mrs Edwards would have paid by way of ingoing contribution fee at another retirement village, had they not moved into Woolcott Village in 2001, nor what they would have been entitled to receive by way of departure fee, when subsequently leaving such accommodation. This, it was argued, made it impossible to assess damages, the proper measure of which depended on what would have flowed from an entirely different transaction. The best that could be done would be to discount the damages by 50%. Otherwise, the only option would be to conjecture that Mr and Mrs Edwards would not have sold their unit at Hornsby. That they had the value of the occupation of a unit at Woolcott Court for 3 or 4 years, which suited them, could also not be ignored. On the evidence, the value of that occupancy was the $29,000 per annum rent payable under the lease between Sarana and Woolcott Village. 72 For the plaintiffs it was submitted that this latter argument entirely overlooked that Woolcott Village had the use of the $272,000 ingoing contribution for the entire period of Mr and Mrs Edwards' residence at Woolcott Court. As to the idea of a 50% discount, on the evidence it was entirely reasonable for the Court to proceed on the basis that had Mr and Mrs Edwards been advised as they ought to have been in 2001, they would have used the proceeds of the sale of their unit to acquire one of the available units in another village, at a price they were able to pay. On the evidence, other retirement villages operated under the same legislative scheme. Ingoing contribution fees ranged from $100,000 to $400,000. Mr and Mrs Edwards would have paid an ingoing contribution payment which they could afford and would have been paid a departure fee, in accordance with the provisions of the Retirement Villages Act, on their departure. Had Mr and Mrs Edwards gone elsewhere in 2001, as was open to them then, they would not have suffered the loss which flowed from their transactions with Woolcott Village. It followed that they were entitled to be put back into the position they would have been in, had they not entered this contractual arrangement with Woolcott Village, that being the true measure of the loss which flowed from the defendants' breach of their duty. 73 I am satisfied that the calculation of damages must be approached as the plaintiffs argued. It cannot be overlooked that what Mr and Mrs Edwards paid was not only the $12 per annum under the lease, but also fees for services provided, as well as $252,000 of the $272,000 ingoing contribution, which was to be repaid as a departure fee, after deduction of an amount for each day that they occupied the unit. In the meantime, Woolcott Village had the use of the money. Had Mr and Mrs Edwards been properly advised, they would not have suffered the loss of this departure fee, because they would have gone elsewhere. 74 While the defendants relied on the approach of the High Court in Henville v Walker and Another (2001) 206 CLR 459 to support their approach to the assessment of damages, the case was not of assistance, it seems to me. There it was established that the damages suffered did not only result from the contravention of s 52 of the Trade Practices Act 1974 (Cth) in question, but also from other causes, for which the agent who had given the advice in question was not responsible. This was not such a case, of course, but even so, McHugh J, in the majority, took the view that the entirety of the damages there suffered were recoverable in the proceedings, observing:

Edwards and Anor v Anderson and Ors

At a glance

Court

Decision date

Before

Source

Judgment (101 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (13)

Cited By (2)